Routes to market: enhancing competition in regional road freight

Lebogang Nleya

Road transport is the main mode of transport and a facilitator of international and domestic trade in Africa, accounting for between 80 and 90% of passenger and freight transport in the region.1 High transport prices adversely affect the prices of goods and the terms of trade faced by exporters and importers in the continent. In this context, the current round of SADC negotiations on trade in services has identified road transport as one of the primary areas for trade policy harmonization, including improving competitive outcomes in the sector. This sector has also attracted the attention of some competition authorities, for instance in Malawi where the competition authority is conducting a market inquiry in the road transport sector. It is against this backdrop that the current state of competition and regulation in this sector is assessed.

Much of the literature on road transportation of goods in Africa identifies infrastructure constraints and the inconsistent application of regulation as some of the main drivers of poor outcomes in this sector.2 A recent CCRED study on competition in the road freight sector in Malawi, Tanzania and Zambia also found that outcomes in terms of price and quality of service are affected by the implementation of pro-competitive regulation and the vertical relationships that prevail between large users of road transport (such as copper exporters) and transport operators. Through benchmarking some of the findings against outcomes in West and Central Africa, which are largely driven by formal and informal arrangements to protect domestic industries, we consider factors which drive competitive outcomes in road freight.

Comparing prices and performance

Earlier studies have found that the average cross-border transport prices along major routes throughout Africa did not compare favourably with benchmarks in countries around the world (Figure 1). Transport prices reflect the rates that customers pay for these services. Measured in US cents per ton per kilometre, rates between Chad and Cameroon (Douala – Ndjamena), and Kenya and Uganda (Mombasa – Kampala) were just more than double those in other developing countries such as Pakistan and Brazil, and the US.

Based on the available literature, the outcomes seem to be worse in West and Central Africa, compared to East and southern Africa. Despite being a labour intensive sector with the lowest truck driver’s wages and fixed costs in the world, the road freight sector in West and Central Africa has the highest relative transport prices and poorest services.4 This suggests that operating margins for trucking companies are high in this region. Variable costs (including the costs of lubricants, tyres and fuel, and bribes to a lesser extent) account for close to 70% of the transport costs.5

In addition to high transport prices, the trucking sector in West and Central Africa is characterized by unreliability, small informal operators, old vehicles, and policies and regulations that do not encourage efficiency.6 For instance, transporting goods from Tema port in Ghana to Ouagadougou in Burkina Faso (a distance of about 1050 km) costs five times as much as transporting goods over the same distance from Newark to Chicago in the US.7

Furthermore, several of these countries still lag behind when it comes to the efficacy and adequacy of trade logistics systems based on the World Bank Logistics Performance Index (LPI) (Figure 2). 

In terms of the performance of domestic logistics systems, the outcomes in East and southern African countries are not much better although Malawi has outperformed Zambia and Tanzania in terms of the LPI. Similarly, cross-border rates measured in $ per ton per kilometre along major routes between these countries are also comparable, although it is clear that per ton rates from the ports of Beira and Dar es Salaam to Lusaka are relatively higher than those to Lilongwe in Malawi (Table 1). These rates apply specifically to the transportation of fertilizer which was the subject of the CCRED study.

The dynamics in the domestic markets are significantly different. For instance, domestic transport rates in Malawi were found to be higher than cross-border rates.10 Currently, domestic transport rates in Malawi are between $0.13 and $0.14 per ton per kilometre which are higher than the corresponding estimate in Zambia of approximately $0.10 and those in Tanzania which lie between $0.09 and $0.12 from Dar es Salaam to different locations in Tanzania. This may have to do with economies of distance where longer distances incur lower rates, as well as fierce competition between cross-border operators from different countries. However, we also expect cross-border rates to also account for expected delays and fees at different border posts, weighbridges and bribery at checkpoints along the routes, and a lack of return loads such that rates would be higher as each of these factors increases. We consider other possible drivers of high prices across countries.

Drivers of transport prices in southern and East Africa

Several countries in southern and East Africa have made some progress in terms of improving competitive outcomes in road freight. For example, the Zambian road freight industry is characterized by improving transport quality, declining transport prices, high competition between Zambian, Zimbabwean and South African cross-border operators which have improved cost-competitiveness, and improvements in road infrastructure. This is partly because of a regulatory environment which has encouraged greater competition. For instance, from 2008/9 Zambian companies could import second-hand trucks on a duty-free basis thus lowering finance, depreciation and insurance costs. The authorities have also improved the processes for obtaining trucking permits. The effect of these improvements has been relatively lower transport prices. 

Similarly, the road freight sector in Tanzania has become highly competitive due to an influx of trucks after rail transport on the TAZARA network (between Tanzania and Zambia) was significantly reduced in 2010, resulting in relatively lower domestic transport rates. Furthermore, the relaxation of government regulations which initially restricted the transportation of heavy loads to rail freight and the removal of surcharges for the purchase of second-hand trucks are some of the factors that have led to the increase in entry and competition.11

However, the biggest challenge in the Zambian market remains high fuel costs relative to other African countries.12 Along with high fuel costs, domestic operators have been disadvantaged in terms of domestic toll roads, taxes and levies that are otherwise not incurred by competing operators in neighbouring countries.13 This impedes the ability of these firms to grow their operations and compete in cross-border markets, although they can still operate domestically. In order to protect these domestic operators from further foreign competition, governments are often influenced by trucking lobby groups to continue to enforce restrictions on cabotage (which are widely applied in SADC) prohibiting foreign firms from transporting cargo between two points within a foreign country. This has the effect of allowing smaller domestic operators to dominate local routes.

In most African countries with agrarian economies, a significant proportion of domestic transportation involves transporting goods (inputs such as fertiliser and other consumption goods) from main cities and ports to farming areas. However, domestic truck operators in most countries have few opportunities for return or back loads due to limited production of goods in rural areas. Where trucking companies do not have return loads, they tend to factor the costs incurred over both legs of a trip into the price of one leg, resulting in higher prices to customers. For instance, Malawi has a heavily regulated road freight sector, characterized by relatively higher domestic transport prices than other countries in southern Africa, few large players in the market and small owner-driver operators, and empty back loads (especially on rural routes). Further, rural routes have high transport prices because of the poor quality of feeder roads and low levels of trade volume.14 There are also indications that the road transport agency in Malawi has a practice of recommending transport rates for the market, which truck owners can use as a benchmark. This distorts competition in the domestic market. Together these factors drive the relatively high domestic transport rates. One of the few advantages of operating in the Malawian market has been that there are no weight limits for trucks which means that domestic trucking companies in particular can benefit from earning additional margins (in the short term) on larger loads.15

Drivers of transport prices in West and Central Africa

Previous studies on road transport in West Africa in particular have found that high prices were driven by corruption at roadway checkpoints16 and high vehicle operating costs that resulted from poor roads and infrastructure.17 This is despite significant investments by donors and governments in infrastructure improvement programmes. However, indications are that these outcomes are also driven by anti-competitive arrangements led by interest groups such as trucking associations that are able to manipulate the regulatory environment.

For instance, in West Africa some domestic and cross-border routes are ‘regulated’ through quota and queuing systems operated through freight bureaus, industry associations and shippers’ councils. These organisations often have influence over port processes for incoming cargo. Similarly, Central Africa’s trucking system is also characterized by cartels whereby freight bureaus and transport associations govern the system. One example is that these associations divide cargo destined for Burkina Faso, Mali and Niger between trucks from landlocked and port countries on a first-come-first-served basis.18 Formal systems such as the one-third/two-third system contained in the ECOWAS Interstate Transport Convention allocate two-thirds of freight passing through the ports for inland countries to transporters from the destination states. While these bilateral agreements which are implemented differently across countries try to ensure fairness, it distorts the competition between cross-border transporters which has been shown to have positive benefits in Zambia, for instance.

As a result of these formal and informal regulations, it is difficult to penetrate the market as a new entrant leading to low levels of competition and high transport prices.19 These informal systems allow older trucks to compete with newer vehicles and as a result, importers prefer to pay higher prices to get reliable trucks which are in better road condition.20 Furthermore, queuing systems mean that truckers have to wait their turn to be allocated a load regardless of the condition of their vehicles. Due to an oversupply of trucks some operators offer bribes to ensure that they receive a load.21 Similar systems are in place at some of the copper mines in Zambia and the DRC, where truck operators sometimes rely on having ‘connections’ and agents waiting at the mines to secure loads. However, the prices in these markets tend to be moderated by the fact that powerful buyers of transport services such as copper mines are able to dictate the prices they are prepared to pay for reliable transport, especially where there is an oversupply of trucks. The countervailing buyer power of large firms is an important factor in affecting outcomes in road freight markets.

Importantly, these systems prevent trucking companies from competing on the basis of prices and the quality of their service (including roadworthiness).22

The situation in some countries is somewhat different as there is a seasonal undersupply of trucks. For example, this occurs during the cocoa harvesting season in Ghana and prior to the farming seasons. The queuing and quota system do not operate to a great extent in Ivory Coast and Ghana and as such there seems to be less market power vested in the associations. In these countries, some truckers and freight forwarders in the ‘formal’ sector will contract directly with importers and exporters to transport their goods.23 However, prices in Ghana remain high driven by this undersupply, restrictions on cabotage which restrict competition and efficiency as well as axle load limits24 as in Tanzania. Asymmetry in the application of axle limits between countries restricts the ability of trucking companies to carry optimal loads and obtain optimal return loads when they transit between countries that apply different limits.


With increasing intra-regional trade flows in recent years, it will become more important for countries to harmonize policies which affect road freight. Road transport is an integral part of the value chain for trade in goods between countries in the continent, and regulatory solutions between countries through regional bodies and better implementation of those efforts to harmonize regulations can result in reduced costs and improved outcomes. Improving infrastructure remains an important precondition along with reviving the role of rail networks. 

However, there is also scope for interventions that directly seek to increase rivalry such as investigations into the use of industry associations in transport to distort competition. These systems are deeply entrenched along routes in West Africa in particular such that competition authorities would benefit from working with both users of transport services, port regulators, industry associations and the road freight firms themselves as well. As evidenced in Zambia, the introduction of pro-competitive regulatory measures and allowing for effective entry from foreign competitors can reduce the prices of transport. Competitive outcomes are improved not by simply increasing entry to the sector, but encouraging competition based on price and quality of service (including adherence to safety and performance standards). 

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  1. See Ward, N. & Barreto, E. (2011). ‘Technical Report: Road Freight Transport Services Diagnostic Study’ for USAID Southern African Trade Hub; and Raballand, G. & Macchi, P. (2008). ‘Transport Prices and Costs: The Need to Revisit Donors Policies in Transport in Africa’. World Bank.
  2. See note 1.
  3. Teravaninthorn, S. & Raballand, G. (2009). ‘Transport prices and costs in Africa: A review of international corridors’. World Bank.
  4. See ‘“Organised Chaos": Analysing Governance in the Private Transport and Trucking Sector Ghana’. IDL Group Working Paper No. 5.
  5. Amjadi, A. & Yeats, A. J. (1995). ‘Have Transport Costs Contributed to the Relative Decline of Sub- Saharan African Exports?’ Policy Research Working Paper No. 1559. World Bank.
  6. See note 4.
  7. West Africa Trade Hub (WATH). (2010b). ‘Transport and Logistics Costs on the Tema-Ouagadougou Corridor’. Technical Report No. 25.
  8. World Bank Logistics Performance Index 2014. 
  9. Ncube, P., Roberts, S. & Vilakazi, T. (forthcoming, 2014). ‘Study of competition in the road freight sector in the SADC region - case study of fertilizer transport and trading in Zambia, Tanzania and Malawi’. CCRED, University of Johannesburg. 
  10. See note 9.
  11. See note 9.
  12. Raballand, G., Kunaka, C. & Giersing, B. (2008). ‘The impact of regional liberalization and harmonization in road transport services: a focus on Zambia and lessons for landlocked countries’. Africa Transport Department Policy Working Paper No. 4482. World Bank.
  13. See note 9.
  14. Lall, S. V., Wang, H. & Munthali, T. (2009). ‘Explaining high transport costs within Malawi: Bad roads or lack of trucking competition?’ World Bank Policy Research Working Paper No. 5133.
  15. See note 9.
  16. See note 7.
  17. See note 3.
  18. See note 7.
  19. See note 4.
  20. See note 4.
  21. See note 7.
  22. Zerelli, S. & Cook, A. (2010a). ‘Trucking to West Africa's landlocked countries: Market structure and conduct’. USAID/West Africa Trade Hub Technical Report No. 32.
  23. See note 22.
  24. See note 22.