REPORT SUBMITTED. Assessment of the Priority Trade Facilitation Measures in Mozambique MARCH 2017 PREPARED BY:

Transcription

1 REPORT SUBMITTED TO Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) Assessment of the Priority Trade Facilitation Measures in Mozambique MARCH 2017 PREPARED BY: Claire Hassoun Catherine Grant Makokera Heinrich Krogman On behalf of the: Tutwa Consulting Group Postnet suite #22 Private Bag X20009, Garsfontein Pretoria, 0042

2 Table of Contents TABLES... iv FIGURES... iv ABBREVIATIONS AND ACRONYMS... v Executive Summary... vii 1.1 Main Findings and Conclusions... vii 1.2 National Level Recommendations... viii 1.3 Regional Level Recommendations... ix 1.4 Opportunities for Future Research... x 1 Introduction Background Purpose, Audience and Uses Assessment Questions Assessment Methodology Organisation of the Country Report Country Context and Analysis Structure of Mozambique s Economy Overview of trade in Mozambique Regional Trade Performance National Trade Facilitation Policy Objectives How Does Mozambique Rank in Trade Facilitation Measure Indices? Domestic Processes for Trade Facilitation Synthesis of Literature Review Findings Ranking Trade Facilitation Measures in Terms of Priority Key Obstacles and Challenges to Trade Other Constraints to Trade Assessment Questions 1-3: The findings of the TFMs Trade Facilitation Measure Priority #1: Improvement of port facilities and associated transport infrastructure Trade Facilitation Measure Priority #2: Removal of non- tariff barriers Trade Facilitation Measure Priority #3: Improved Internal Coordination Trade Facilitation Measure Priority #4: Improved Border Management and Coordination Findings on Other Trade Facilitation Measure Priorities Raised by Key Informant Interview Respondents Conclusions for Ranking the Selected Trade Facilitation Measures Priority Trade Facilitation Measures Non- Priority Trade Facilitation Measures Category C priorities Recommendations ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA ii

3 6.1 General focus Recommendations for Implementing Mozambique Activities Recommendations for Implementing Regional Activities Recommendations for Future Research Bibliography Annex I: Key Informant Interview Respondents List Annex II: Online Survey Questionnaire ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA iii

4 TABLES Table 1: Mozambique s trade balance with SADC member states (in USD '000)... 7 Table 2: Bilateral trade between Mozambique and the SADC by product at HS- 2 (in USD '000) bottom Table 3: Bilateral trade between Mozambique and the SADC by product at HS- 2 (in USD '000) top Table 4: Mozambique s imports from SADC, HS- 2, USD '000, Table 5: Mozambique s exports to the SADC, HS- 2, USD '000, Table 6: Mozambique World Bank Doing Business Index (2017) Table 7: Mozambique World Bank Logistics Performance Index, Rank and Score (2014/2016) Table 8: OECD Trade Facilitation Indicators Mozambique Table 9: World Economic Forum Global Competitiveness Index Mozambique (2015) Table 10: Categorization of TFA by Mozambique s government, June Table 11: List of priorities discussed in interviews and assessed in the online survey for Mozambique.. 23 Table 12: Frequency of Specific Trade Facilitation Measures, raised as a priority during the Interviews. 25 Table 13: Final TFM rankings for the two data sets (highest to lowest) FIGURES Figure 3: 2014 GDP value added per sector... 5 Figure 4: 2014 Industry value- added and Gross Domestic Product (Constant 2010 prices, % change year- on- year)... 5 Figure 5 : Total Import and Export value in Mozambique, estimated and forecast, Figure 6: Import and Export value between SADC and Mozambique, USD 000 (Source: Trademap)... 7 Figure 7: Mozambique Doing Business, trading across borders (2017) Figure 8: LPI rankings in the SADC region, Figure 9: Mozambique World Bank Logistics Performance Index Scores (2014) Figure 10: Mozambique World Bank Logistics Performance Index Scores (2016) Figure 11: Comparison of Mozambique s performance on OECD TFIs between 2012 and Figure 12: Comparison of Mozambique s performance on OECD trade facilitation indicators against regional and global standards Figure 13: How Online Survey respondents rated the eight selected TFMs as a priority for implementation in Mozambique, Mean Weighted Priority (N=10) Figure 14: How Online Survey respondents rated the eight selected TFMs as a priority for implementation in Mozambique Figure 15: How Online Survey respondents ranked the eight selected TFMs against each other as a priority for implementation in Mozambique, Mean Weighted Ranking (N=10) Figure 16: How Online Survey respondents ranked the eight selected TFMs against each other as a priority for implementation in Mozambique, N= ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA iv

5 ABBREVIATIONS AND ACRONYMS AGOA ASYCUDA CBM CET CFM CFTA COMESA DFID DRC EAC EPA EU FDI FTA GATS GATT GCI GDP GoM GVCs HDI IMF ISIC ITC KII LPI M&E MCNET MTC MCLI NSW NTB ODA OECD African Growth and Opportunities Act Automated System for Customs Data Coordinated border management Common external tariff Portos e Caminos de Ferros em Moçambique Mozambique Ports and Railways Continental free trade area Common Market for Eastern and Southern Africa Department for International Development (UK) Democratic Republic of the Congo East African Community Economic Partnership Agreement European Union Foreign direct investment Free trade area General Agreement on Trade in Services General Agreement on Tariffs and Trade Global Competitiveness Index (WEF) Gross domestic product Government of Mozambique Global Value Chains Human Development Index International Monetary Fund International Standard Industrial Classification International Trade Centre Key informant interview Logistics Performance Index (World Bank) Monitoring and evaluation Mozambique Community Network / Mozambique TradeNet Ministério dos Transportes e Comunicações - Ministry of Transportations and Communication Maputo Corridor Logistics Initiative National Electronic window Non- tariff barrier Official Development Assistance Organisation for Economic Cooperation and Development ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA v

6 OSBP RKC SACU SADC SEW SME SPS TBT TF TFA TFI TFM TFP TFTA UNDP USAID WCO WEF WTO One- Stop Border Post Revised Kyoto Convention Southern African Customs Union Southern African Development Community Single Electronic Window Small and Medium- Sized Enterprises Sanitary and Phytosanitary measures Technical Barrier to Trade Trade facilitation Trade Facilitation Agreement (WTO) Trade Facilitation Indicator (OECD) Trade Facilitation Measure Trade Facilitation Programme (SADC) Tripartite Free Trade Agreement United Nations Development Programme United States Agency for International Development World Customs Organization World Economic Forum World Trade Organisation ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA vi

7 Executive Summary The trade facilitation measure (TFM) assessment is intended to provide useful guidance to governments, development partners and the business community in their oversight of future trade facilitation (TF) related activities. This report presents results from the Mozambique assessment, one of the seven countries selected by USAID and GIZ for the study 1. The assessment focuses on capturing stakeholders informed views on the future costs of and benefits from TFM implementation. It is not intended to assess the costs and benefits of trade measures that have already been implemented, although there are some reflections on policies or procedures that require review in the opinion of the stakeholders interviewed. To guide the approach for the assessment, the assessment team developed the following set of research questions: 1. What is the potential range of benefits associated with the implementation of specific TFMs or categories of TFMs? 2. What is the potential range of costs associated with the implementation of specific TFMs or categories of TFMs? 3. What is the feasibility and timeframe of the implementation of specific TFMs or categories of TFMs? 4. How do respondents rank their priorities among the TFMs they consider the most important to implement? The priority TFMs for action in Mozambique are ranked as follows: 1. Improved port- related facilities. 2. Removal of non- tariff barriers. 3. Internal coordination among agencies responsible for trade facilitation. 4. Improvement of border management and coordination. The rankings are based on key informant interviews (KII), an online survey of sector stakeholders, as well as the expertise of the assessment team. 1.1 Main Findings and Conclusions Mozambique has ratified the WTO s Trade Facilitation Agreement. This included categorization of the measures - 24 measures were deemed to fall within Category A, seven within Category B, and 10 within Category C. The Category C measures included enquiry points, disciplines on fees and charges, advance rulings, border agency cooperation, single window and pre- shipment inspection. This list was also in line with the findings of other global indexes that looked at trade facilitation in Mozambique, such as the OECD Trade Facilitation Index and the Logistics Performance Index. 1 The other countries included Botswana, Malawi, Namibia, South Africa, Zambia and Zimbabwe. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA vii

8 On the priority TFMs identified by this study, the improvement of port- related facilities was ranked first. A consensus was reached among the stakeholders interviewed on the necessity to improve the management and operation of the existing infrastructure, including better coordination among all facilities, rather than expanding or building new infrastructure. Although highly challenging, addressing this measure through better coordination within the management teams, better recruitment and in- house training, and better coordination with other modes of transportation appears to be the most efficient way to reduce the time needed to import and export in Mozambique. The removal of the NTBs was ranked second. This TFM offers immediate and tangible benefits, particularly in reducing the costs of transport in Mozambique and regionally. The cost of solutions to several NTBs could be relatively inexpensive which, on balance, led to the assessment team to rank it as the second- most cost- effective issue for attention going forward. The challenge is the dynamic nature of NTBs. 2 This suggests that a nuanced and adaptive approach, short of an agenda that attempts the elimination of all NTBs in the short term, and a focus on tackling a few key issues could result in improved TF, such as the facilitation of coordinated border opening hours and the implementation of a performance management system for customs officials. The third priority TFM for Mozambique concerns the improvement of internal coordination, which we associated partly with the expansion of the Single Electronic Window to other agencies, and partly with the improvement of dialogue with the private sector. Finally, improvements to border management and coordination is ranked as the fourth priority for Mozambique. This is particularly the case with regards to the interactions between South Africa and Mozambique as well as with Zimbabwe. These are the most important trading partners for Mozambique in the region and therefore the potential benefits of greater levels of cooperation are significant. 1.2 National Level Recommendations Recommendations to Development Partners Development partners should support the Category C interventions identified by Mozambique in its notification to the WTO under the Trade Facilitation Agreement, with a particular focus on those issues that are a priority for the private sector, such as coordinated border management and full implementation of the Single Electronic Window. Development partners should not ignore some of the trade facilitation measures that have been identified as Category A and B for Mozambique. There is room for interventions in a number of areas such as risk management systems and the publication of information. Development partners should support activities aimed at the elaboration of a comprehensive trade strategy that sets out a detailed vision for Mozambique as a trading partner. This process should include the public and private sectors as well as representatives from the different regions of the country. There is scope of improved coordination between transport and logistics interventions by development partners and sectoral support projects (e.g. in the area of agriculture). This could 2 As one example, the removal of or decrease in the scanning fees is part of a large negotiation with the private operator. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA viii

9 contribute to an overall improvement in trade facilitation, while also addressing the specific concerns of certain key value chains. Development partners should continue to assist credible private sector associations in Mozambique to build the capacity required to engage in evidence based policy advocacy activities in the area of trade facilitation. Development partners should assist the Maputo Corridor Logistics Initiative and other corridor authorities or organisations in Mozambique to design effective strategies for capacity development and sustainability. Recommendations to the Mozambican Government The Government of Mozambique should elaborate a trade vision and strategy, which is designed with the participation of the private sector, to the extent possible. At the very least the private sector should be involved in the implementation plans and activities for the strategy. The Mozambican Government should build on the creation of the National Trade Facilitation Committee to promote greater coordination and engagement of all agencies involved in trade. There are some useful lessons from the experience of e- BAU that should be built upon in the area of trade facilitation. The Government of Mozambique should implement a performance management system for customs officials that is used as the basis for the identification of additional resources and training requirements. The Single Electronic Window process should be fully implemented and extended to include additional government agencies involved in trade processes in Mozambique. The outsourcing of various trade management services (e.g. scanning) to private sector companies should be evaluated to ensure that the impact is positive with regards to trade facilitation. 1.3 Regional Level Recommendations Recommendations to Development Partners At the regional level, it is recommended that there be stronger coordination amongst all development partners supporting trade facilitation initiatives. This could help in addressing coordination challenges (e.g. between single electronic window systems) and in the exchange of information about the activities underway at the regional level. Development partners should support a corridor- based approach to trade facilitation and infrastructure activities in SADC. This would be beneficial for Mozambique given the need for greater coherence between the approaches of different ports and the challenges of competition in the region. Recommendations to Member States of the Tripartite Free Trade Area The Member States of the Tripartite Free Trade Area should redouble their efforts to resolve reported non- tariff barriers. The focus of the infrastructure pillar under the Tripartite process should include dialogue on the effective and efficient management of physical transport infrastructure (not just a focus on the development of new projects). ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA ix

10 1.4 Opportunities for Future Research There are gaps in this research and it would benefit from additional interviews and interactions with small and medium sized enterprises as well as those stakeholders who are based outside of Maputo, particularly in the regions of Nacala and Beira. Development partners should support supplementary research in Mozambique to explore the trade facilitation experiences of the informal sector, including the impact of illegal imports. This research captures the views of formal operators. If this study has not yet already been undertaken, a specific impact assessment on the operation of the border post between Mozambique and South Africa on 24/7 basis would be useful. The data collected by the Single Electronic Window system could form the basis of a number of additional research outputs to identify key trade trends in Mozambique. The analysis could be undertaken across a series of indicators that are useful for both the public and private sectors in the design of new policies and the strategic vision (recommended above). ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA x

11 1 Introduction 1.1 Background For countries, reducing unnecessary delays and costs increases trade, attracts investments, and supports growth and job creation. TFMs can particularly benefit developing countries, where exporting goods frequently takes three times as many days as it does in developed nations. According to a study by the Organisation for Economic Cooperation and Development (OECD), for sub- Saharan African countries, a 4.5- day reduction at the border would generate approximately 10 percent increased exports with OECD countries and greater increases for exports to other regions. 3 Given the prominence of TF on the world s development stage an area where the next wave of gains from trade could be extracted donors and other partners have emphasized assisting developing and least- developed countries in implementing the WTO TFA signed in Bali in The TFA represents a commitment by WTO members to harmonise trade policies and practices to expedite the movement, release and clearance of goods, including goods in transit. The TFA contains approximately 35 technical measures imposing obligations on WTO members to: Increase transparency. Improve governance through disciplines on rule and decision-making processes. Implement streamlined and modernized border procedures and control techniques. Enhance the movement of goods in transit. (OECD, 2015) The TFA contains special provisions for developing and least- developed countries, including transitional periods for implementation of TFMs and the designation of certain measures ( Category C ) as requiring development assistance and support for capacity building before implementation. Southern African Development Community s Trade Facilitation Programme The assessment examined TFMs that are based primarily on those described in SADC s Trade Facilitation Programme (TFP), which was developed in consultation with key stakeholders from SADC member states at the request of the SADC Secretariat. The TFP outlines a harmonised approach to TF for SADC member states to use as a blueprint to help them meet the WTO TFA s recommendations. The TFP uses a five- year timeline and covers 28 TFMs clustered around four pillars: transparency, predictability, simplification and cooperation. The TFP measures roughly correspond to the TFA s requirements, but are not identical. They include such measures as national single windows (NSW), trade information portals, appeals procedures and an inter- regional transit management system. While there is recent research on the positive effects of TF generally, there is a dearth of reliable quantitative information on the cost of implementation of specific TFMs (Duval, 2006). 4 This is especially the case for southern Africa. In the absence of quantitative information on the costs and benefits of TF, Duval (2006) argued that expert surveys, even with their limitations, could be used to examine the relative cost of implementing a range of TFMs. 5 3 Wilson, N., (2009). Examining the effect of certain customs and administrative procedures on trade. OECD Trade Policy Studies, Yann D., (2006). Cost and benefits of implementing trade facilitation measures under negotiations at the WTO: An exploratory survey. Asia- Pacific Research and Training Network on Trade Working Paper Series 3. 5 The Duval survey conducted qualitative research with 14 trade facilitation experts based in Asia to assess the anticipated costs and benefits of ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 1

12 1.2 Purpose, Audience and Uses This TFM assessment is intended to provide useful guidance to stakeholders engaged in future TF related activities in southern Africa. The assessment is not intended to assess the costs and benefits of trade measures that have already been implemented, but instead focused on capturing stakeholders informed views on the future costs of and benefits from TFM implementation. The assessment has covered seven SADC member states to date: Botswana, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe. 6 The primary audiences for this assessment are government agencies involved in TF, including industry and economic growth promotion, revenue collection and customs functions; the SADC and SACU Secretariats; and other bilateral and multilateral partners in the region as well as business associations and other researchers. It will also be useful for international development partners, such as GIZ and USAID, in guiding the priorities and work plans for future activities to support TF in the region. In particular, this is intended to generate evidence not available from other sources that will guide in advising and assisting SADC governments that request support in deciding how to implement WTO TFA "Category C" TFMs, and other national and regional- level TF protocols, plans and programmes. 1.3 Assessment Questions To guide the approach for the assessment and align its findings with the intended uses described above, the following set of research questions was developed: 1. What is the potential range of benefits associated with the implementation of specific TFMs or categories of TFMs? 2. What is the potential range of costs associated with the implementation of specific TFMs or categories of TFMs? 3. What is the feasibility and timeframe of the implementation of specific TFMs or categories of TFMs? 4. How do respondents rank their priorities among the TFMs they consider the most important to implement? 1.4 Assessment Methodology The assessment used a mixed- method approach to generate and triangulate evidence about the perceptions of a wide spectrum of stakeholders as to the relative importance of TFMs, and how best to sequence them in the countries of study. Data collection methods and sources included comprehensive reviews of national and regional level policy documents and secondary data, in- depth semi- structured interviews with knowledgeable stakeholders, as well as brief online surveys that targeted members of trade and supply chain associations in each country of study. This largely qualitative approach generated in- depth country- specific analyses and rich descriptions of the perceptions of key stakeholders, primarily from private- sector actors involved in different aspects of cross- border trade. The assessment report also provides some descriptive statistics for analysing collected data. The assessment team used these findings to build conclusions on the optimal selection and sequencing of TFMs and recommendations for implementing TF interventions in each country of study. specific TFMs. 6 USAID categorizes these five countries as within southern Africa. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 2

13 1.5 Organisation of the Country Report This report is organised as follows: The first section presents key TF and economic data and information. Together, they provide the context for implementing recommended TFMs and interventions. The second section offers the findings for Assessment Question 4, detailing how respondents ranked the various TFMs in order of importance for implementation. This includes a table that lists the TFMs that the assessment team anticipated would be prioritised as well as all other TFMs and/or crosscutting issues that emerged as priorities from the Mozambique KII data and the online survey The third section presents the findings on the key obstacles and challenges to trade as identified by the KII respondents. In the fourth section, the findings for Assessment Questions 1 through 3 (benefits, costs and sequencing considerations) are presented for each TFM that was selected as a priority. After the findings, conclusions are presented, ranking the TFMs in terms of priority for implementation in Mozambique. The assessment team applied their collective subject matter expertise to interpret all findings to develop these conclusions. Finally, the report offers recommendations for key players. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 3

14 2 Country Context and Analysis 2.1 Structure of Mozambique s Economy Current context The story of Mozambique s development over the past decade mirrors the path taken by other resource- driven economies in a number of ways. The launch of the country s first mega- project, Mozal 7, in 1998, and the discovery of coal reserves in Moatize in 2003 (and now operated by the Brazilian company Vale) put the country on the map for natural- resource project investors. The gigantic proven gas reserves, discovered in the north of the country in 2009, confirmed the potential of Mozambique, and enabled the economy to boast stable annual growth above 7 percent for a decade up to This also led the IMF to estimate in early 2016 economic growth of 24 percent from the start of the operations of these projects (estimated to start in 2020 at that time). This spectacular growth by world standards did not immediately trickle down to the whole population, despite major improvements in a range of poverty indicators. Mozambique has remained low on the Human Development Index (HDI), compared to other sub- Saharan African countries. The multi- dimensional poverty headcount computed by DFID in 2015 is 9.5 percent higher than income poverty, illustrating the struggle for Mozambique to generate inclusive growth and to lift its population out of poverty. These challenges could worsen in the coming years; the formerly bright prospects have been curtailed in the aftermath of external and internal shocks. Mozambique was hit by the general fall in commodity prices since 2015, which has simultaneously decreased the export of raw materials for ongoing operations and delayed final investment decisions for gas projects, thus slowing down foreign and public investment. Thus, after a decade of sustained annual growth of over 7 percent before 2014, the projection for economic growth in 2016 was revised to 3.6 percent, according to the World Bank. The discovery of a secret debt contract by the government in 2014 and 2015 has worsened the mid- term prospects of the country; it has been downgraded to a partial default country, sending pessimistic signals to foreign investors. While Mozambique s dollar reserves have decreased, the impact on trade in a highly import- dependent economy has been immediate. The local currency depreciated by 70 percent in two years and inflation amounted to more than 25 percent in 2016, according to the Bank of Mozambique. Multilateral and bilateral development partners halted their budget support in early 2016, and the IMF has disclosed an austerity plan in 2017 that will impact the general population. While exogenous factors in commodity markets have had a direct impact on trade, the internal challenges faced by the economy have impacted on trade volume and costs for all corporations and businesses engaged in trade in Mozambique. These issues were raised throughout the interviews conducted in Mozambique, and will be considered in the present analysis as a critical part of the context for the trade facilitation assessment. 7 Mozal exports aluminium to the Netherlands in a tripartite agreement between Australia (which supplies bauxite), South Africa (providing electricity), and the government of Mozambique. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 4

15 Economic drivers Figure 1: 2014 GDP value added per sector % GDP Agriculture, forestry, fishing, and hunting 25.5 Mining and quarrying 3.9 Manufacturing 10 Electricity, gas, and water 3.9 Construction 14.6 Wholesale and retail trade; repair of vehicles and household goods; restaurants and hotels 2.3 Transport, storage, and communication 13.3 Finance, real estate, and business services 9.2 Public administration and defense 6.1 Other services 11.3 Source: African Economic Outlook 2016, Mozambique AFDB, OCED, UNDP (2016) While a clear shift to a heavily resource- driven economic profile is still expected in the 2020s, Mozambique today is mostly driven by services (53 percent), followed by agriculture (25 percent) and industry (22 percent). As shown in Figure 4, agricultural growth has declined since 2010, while construction and mining and quarrying have grown, as per the development of natural resources projects and associated infrastructure and real- estate development. Figure 2: 2014 Industry value- added and Gross Domestic Product (Constant 2010 prices, % change year- on- year) Wholesale & retail, - 11% Transport & com, - 1% Manufacturing, - 1% Agriculture, - 4% Other services, 2% Public administravon and defence, 1% Finance, real estate and business services, 0% Electricity, gas and water, 0% Mining and quarrying, 2% Construcvon, 13% - 15% - 10% - 5% 0% 5% 10% 15% African Economic Outlook 2016 Source: ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 5

16 2.2 Overview of trade in Mozambique Mozambique has traditionally had a balance- of- payments deficit, depending heavily on imports for consumer and capital goods. While exports have grown faster than imports over the past decade, imports still represented 70 percent of trade in 2015 (World Bank), equivalent to USD 7.9 billion, while exports represented 30 percent, amounting to USD 3.2 billion. Figure 3 : Total Import and Export value in Mozambique, estimated and forecast, Source: BMI report, Q A large majority of Mozambique s exports consists of intermediate goods (66 percent, mainly aluminium transformed goods based on imported bauxite), followed by raw materials (coke and natural gas, around 20 percent), which indicates that it is a resource- driven economy. Exports to the Netherlands represent 29.8 percent of aluminium production, while exports to South Africa stand at 18.3 percent, mainly through electricity production and natural gas, while exports to India come to 10.6 percent, from the agro industry. Imports are more balanced in the goods profile, with 35 percent being capital goods in 2015, 33 percent consumer goods, 25 percent intermediate goods, and 5 percent raw material goods. South Africa remains Mozambique s leading partner for imports, with 30 percent of total imports worth USD 2,380 million. This is followed by China whose import share has grown at an average annual rate of 30 percent since 2011, and represented 12.5 percent of Mozambican imports in The rest of the imports are diversified among a large set of partners, from the Middle East and Europe. Based on the recent discovery of gas and other natural resources (e.g., graphite), as well as a shift in demand from East Asia and a strong commitment by the government to substitute agro- industrial imports from South Africa, the trade balance is expected to change in the medium term. Nevertheless, the Southern African Development Community (SADC), strongly led by South Africa, is expected to remain a major partner of Mozambique for both imports and exports. In addition to traditional imports and exports, Mozambique is strategically positioned in the Southern Africa region as a gateway to the Indian Ocean, especially for a number of neighbouring landlocked countries, as well as the ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 6

17 northeastern provinces of South Africa that are closer to Maputo than South African ports. On the basis of port statistics from the CFM (the state- owned railway company in Mozambique), transit in 2015 represented up to 48 percent of the traffic in the country s three main ports: Maputo, Beira and Nacala. While each port traditionally serves a specific catchment area (Maputo port serves the north- east provinces in South Africa and Swaziland; Beira port serves Zimbabwe, Zambia, Malawi and the DRC; and Nacala port now serves Malawi), the performance of each port and related transportation infrastructure leads Mozambique s neighbouring countries to conduct regular arbitrage on the best options to ship their transit cargo. Transit is thus a very important issue in Mozambique s trade dynamics, and a major source of attention for Mozambique s logistics and transportation companies, as well as infrastructure operators in the port, in order to stay competitive. 2.3 Regional Trade Performance Compared to its neighbours, Mozambique can be considered an exception, being part of only one regional- level trade agreement the SADC. Unsurprisingly, SADC Member States are key partners for Mozambique, which trades only to a limited extent with other African countries outside the SADC. As previously mentioned, transit is a major parameter of Mozambique s economic relationships with its SADC partners. Similar to global trade tendencies, Mozambique s trade with SADC is heavily skewed towards imports. This is all the more true with its first SADC partner, South Africa. Figure 4: Import and Export value between SADC and Mozambique, USD 000 (Source: Trademap) USD '000 $ $ $ $ $ $ $ $ $ $ $ Imports Exports In 2015, imports from SADC represented 75 percent of trade with the region, of which 90 percent came from South Africa. On the other hand, exports to South Africa represented 74 percent of Mozambique s exports to the SADC. South Africa is followed by Zimbabwe, from where imports have grown at an annual rate of 48 percent over the past five years. Table 1: Mozambique s trade balance with SADC member states (in USD '000) Trading partners among SADC member states Value imported in 2015 (USD 000) South Africa 2,380,229-1,795,110 Trade balance in value in 2015 ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 7

18 Trading partners among SADC member states Value imported in 2015 (USD 000) Zimbabwe 94,351-15,079 Swaziland 50,675-49,532 Namibia 48,102 21,375 Mauritius 25,999-13,089 Malawi 15,273-1,250 Tanzania, United Republic of 12, Zambia 7,764-4,707 Botswana 2,858-2,570 Angola 1,038 3,613 Madagascar Seychelles Lesotho SADC Aggregation 2,639,343-1,855,023 World 7,907,622-4,711,540 Source: TradeMap Trade balance in value in 2015 Mozambique faces a trade deficit in 75 out of 86 product categories. The bottom 10 and top 10 products in trade are listed below. Table 2: Bilateral trade between Mozambique and the SADC by product at HS- 2 8 (in USD '000) bottom 10 Product code Product label Balance in value in 2015 '84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof - 446,374 '87 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof - 304,550 '85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, televisions ,256 '73 Iron and steel products - 166,377 '72 Iron and steel - 94,421 '39 Plastics and articles thereof - 60,601 '03 Fish and crustaceans, molluscs, and other aquatic invertebrates - 59,839 '48 '33 '34 Source: TradeMap Paper and paperboard; articles of paper pulp, paper, or paperboard Essential oils and resinoids; perfumery, cosmetic, or toilet preparations Soap, organic surface- active agents, washing preparations, lubricating preparations, artificial ,669-47,866-44,701 8 Trade Harmonized System Classifications ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 8

19 Table 3: Bilateral trade between Mozambique and the SADC by product at HS- 2 (in USD '000) top 10 Product code Product label Balance in value in 2015 '27 Mineral fuels, mineral oils, and products of their distillation; bituminous substances; mineral ,927 '08 Edible fruit and nuts; peel of citrus fruit or melons 20,617 '67 Prepared feathers and down, and articles made of feathers of down; artificial flowers; articles... 17,891 '52 Cotton 10,755 '88 Aircraft, spacecraft, and parts thereof 7,447 '89 Ships, boats, and floating structures 1,388 '11 Products of the milling industry; malt; starches; inulin; wheat gluten 885 '41 Raw hides and skins (other than fur skins) and leather 393 '05 Products of animal origin, not elsewhere specified or included 352 '53 Other vegetable textile fibres; paper yarn and woven fabrics of paper yarn 154 Source: TradeMap The final two tables in this section provide a breakdown of Mozambique s imports and exports by product type for 2015, following a similar pattern to that of trade balance with the SADC. Rather unsurprisingly, Mozambique s main import products by value in 2015 from the SADC included mineral fuels, oils, and distillation products, along with essential oils, perfumes, cosmetics, toiletries, and sugars and sugar confectionery. Table 4: Mozambique s imports from SADC, HS- 2, USD '000, 2015 Product code Product label Value in 2015, USD 000 '84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 458,968 '27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral ,416 '87 Vehicles other than railway or tramway rolling stock, and parts and accessories thereof 308,601 '85 Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television ,413 '73 Iron or steel products 169,402 '72 Iron and steel 95,959 '22 Beverages, spirits, and vinegar 67,197 '03 Fish and crustaceans, molluscs, and other aquatic invertebrates 67,068 '39 Plastics and articles thereof 61,925 '48 Paper and paperboard; articles of paper pulp, paper, or paperboard 50,993 Source: TradeMap ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 9

20 Table 5: Mozambique s exports to the SADC, HS- 2, USD '000, 2015 Product code Product label Value in 2015, USD 000 '27 Mineral fuels, mineral oils, and products of their distillation; bituminous substances; mineral ,343 '22 Beverages, spirits, and vinegar 31,863 '08 Edible fruit and nuts; peel of citrus fruit or melons 27,116 '67 Prepared feathers and down and articles made of feathers or of down; artificial flowers; articles... 17,952 '84 Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof 12,594 '52 Cotton 12,526 '11 Products of the milling industry; malt; starches; inulin; wheat gluten 11,066 '88 Aircraft, spacecraft, and parts thereof 9,790 '23 Residues and waste from the food industries; prepared animal fodder 9,303 '76 Aluminium and articles thereof 8,940 Source: TradeMap 2.4 National Trade Facilitation Policy Objectives Reducing the country s dependence on imports has traditionally been high on the political agenda in Mozambique. While this objective forms part of the country s strategy with several multilateral and bilateral partners, mostly regarding the promotion of agro- industry products, it has not been addressed in one strategic document. On the other side, the issue of exports has been addressed in the National Strategy for Exports published in However, this strategy is yet to be ratified by the Mozambican government, as mentioned in the diagnostic study for trade integration in Mozambique. 9 More generally, there are up- to- date documents that address trading plans and agreements in Mozambique. Some strategies, such the National Development Plan (ENDE) published in June 2014 and promoting the integration of infrastructure and the Strategy for the Improvement of the Business Environment (EMAN II) tackle trade by supporting economic activity. While promoting the improvement of infrastructure policies, access to finance, and other macro interventions, these documents do not specifically address trade policies. The Strategy for the Integrated Development of Transportation Systems, published in 2012 by the MTC, addresses the logistics chain and the necessity for better coordination and economic efficiency between modes of transportation, but does not develop specific policies. As regards vertical policies, the strategic documents in place have been updated over the past three years in light of the recent development of gas projects and in other key economic sectors such as agriculture, forestry and fishery, tourism, and natural resources. However, these documents remain vague master plans that have not been 9 Estudo Diagnóstico da Integração do Comércio para Moçambique, SPEED, August ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 10

21 developed further into implemented and regulated industrial policies. As described in Chapter 6 and later in the recommendations for Mozambique, stakeholders on the ground, mostly from the private sector, feel this absence of strategy at the macro level and a lack of a clear vision, which hampers coordination on the operations side. The private sector still expects a level of guidance and leadership from the public sector on such the macro- level environment for trade. 2.5 How Does Mozambique Rank in Trade Facilitation Measure Indices? The TFA provisions are linked to comparable measures of the difficulties faced at borders offered by international institutions, including the World Bank Doing Business Index, the WEF Global Competitiveness Report, the World Bank Logistics Performance Index (LPI), and the OECD Trade Facilitation Indicators (TFI). WB Doing Business Index Table 6: Mozambique World Bank Doing Business Index (2017) Trading across borders indicator Mozambique Sub- Saharan Africa Export: border compliance Time to export (hours) Cost to export (USD) Export: documentary compliance Time to export (hours) Cost to export (USD) Import: border compliance Time to import (hours) Cost to import (USD) Import: documentary compliance Time to import (hours) Cost to import (USD) DB 2017 trading across borders (ranking) DB 2017 trading across borders (distance to frontier score/100%) Source: (World Bank, 2016) In terms of trading across borders, Mozambique performs well against the sub- Saharan average, and is only below average on cost to export; it ranks 106 th out of 190 countries measured in the study in The country ranks 10 th out of 48 countries measured in Sub- Saharan Africa, while South Africa ranks 25 th in the same set of countries (South Africa s global ranking is 138 th in 2017). When considering the distance to frontier score, Mozambique still has some way to go to match the world s best performing countries. According to the World Bank Doing Business Mozambique Economic Profile Report, and as demonstrated in Figure 7 below, Mozambique faces much less of a challenge when exporting than when importing, in terms of both time and money spent; more specifically, traders find it quicker to comply with documentary requirements when importing than when exporting. The most relevant trade facilitation measure reported by interviewees in the report remains the Single Electronic Window, which has had the largest impact in terms of trade. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 11

22 Figure 5: Mozambique Doing Business, trading across borders (2017) Exports Imports Source: World Bank Doing Business Economic profile, Mozambique, 2017 WB Logistics Performance Index The World Bank s Logistics Performance Index sheds additional light on Mozambique s performance. Unlike the Doing Business Index, the LPI measures six indicators to generate a holistic view of a country s performance with regards to cross- border value chains. The LPI scores the performance of each country on a scale of one (the lowest) to five (the highest) for the following areas: 1. Customs: the efficiency of customs and border management clearance. 2. Infrastructure: the quality of trade and transport infrastructure. 3. Ease of arranging shipments: the ease of arranging competitively priced shipments. 4. Quality of logistical services: the competence and quality of logistical services trucking, forwarding, and customs brokerage. 5. Tracking and tracing: the ability to track and trace consignments. 6. Timeliness: the frequency with which shipments reach consignees within scheduled or expected delivery times. Since the creation of the LPI by the World Bank in 2007 until 2014, Mozambique has ranked very low, in the bottom 20 countries, in all assessments. Even within SADC, Mozambique has had a very low ranking, only ahead of DRC (see Figure 6 below). ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 12

23 Figure 6: LPI rankings in the SADC region, 2014 This poor performance has been all the more striking, given Mozambique s strategic location and function as the gateway to the Indian Ocean for its neighboring countries. However, in 2016, the LPI revealed a spectacular improvement in Mozambique s performance, as shown in the table below. Mozambique jumped by more than 60 places, from 147 th position in 2014 to 84 th, out of the 160 countries measured. The details of Mozambique s performance are illustrated in Table 7. Table 7: Mozambique World Bank Logistics Performance Index, Rank and Score (2014/2016) Customs Infra- structure International shipments Logistics competence Tracking & tracing Timeliness 2014 Rank Score Rank Score Source: World Bank 2014 and 2016 LPI ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 13

24 Figure 7: Mozambique World Bank Logistics Performance Index Scores (2014) Source: World Bank, 2014 Figure 8: Mozambique World Bank Logistics Performance Index Scores (2016) Source: World Bank, 2016 ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 14

25 Mozambique performed much better in 2016 in all six indicators, and is now above the sub- Saharan average for most. The largest improvement is in international shipments, with a jump of almost 100 places compared to While all the indicators can be improved, the potential areas of improvement in Mozambique include infrastructure and logistical competence, which are still at the sub- Saharan average. It is worth mentioning, however, that these improvements have not translated into higher satisfaction from logistics operators in Mozambique, as further described in Sections 6 and 7. The methodology used for the LPI can shed light on this discrepancy. The World Bank proposes two LPIs: a national LPI based on collected data and an international LPI based on a survey of logistics professionals outside the targeted country. In the case of Mozambique and in the absence of updated data, only the international LPI was assessed. The components analysed in the LPI were chosen based on theoretical and empirical research conducted by the World Bank, in cooperation with logistics professionals involved in international freight forwarding based in countries that deal with Mozambique. During interviews with logistics and transport operators in Mozambique, these purported improvements were not significantly felt. This gap reinforces the need to balance such surveys with applied research and interviews concerning the beneficiary countries. Nevertheless, based on the progression in the LPI since 2014, the main areas for improvement are infrastructure (the lowest global rank of the six indicators) and logistics competence. OCED Trade Facilitation Indicators The Trade Facilitation Indicators (TFI) computed by the OECD align with the TFA and provide governments with information to improve their border procedures, reduce trade costs, and ultimately, boost trade flows. The estimates, based on the indicators, help inform governments about how to prioritize specific TF actions and mobilize technical assistance and capacity- building efforts in a more targeted way. The OECD TFIs score countries performance in each indicator on a scale from zero (the lowest) to two (the highest). Mozambique s scores, progression, and performance against the regional average are presented here below. Table 8: OECD Trade Facilitation Indicators Mozambique OECD TF indicators Advance rulings Appeal procedures Co- operation external Co- operation internal Fees and charges Formalities automation Definition Prior statements by the administration to traders concerning the classification, origin, valuation method, etc. applied to specific goods at the time of importation, and the rules and processes applied to such statements The possibility and way of appealing administrative decisions by border agencies Mozambique s Score Co- operation with neighboring and third countries 2.00 Co- operation between the various border agencies of the country; and control 1.00 delegation to customs authorities Discipline on the fees and charges imposed on imports and exports 1.33 Electronic exchange data; automated border procedures; and use of risk management 0.33 ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 15

26 OECD TF indicators Definition Mozambique s Score 2015 Formalities Simplification of trade documents; harmonization in accordance with 1.10 documents international standards; and acceptance of copies Formalities Streamlining of border controls; single submission points for all required 0.67 procedures documentation (single windows); post- clearance audits; and authorized economic operators Governance Customs structures and functions; accountability; and ethics policy 0.57 and impartiality Information Publication of trade information, including on the Internet; and enquiry points 0.70 availability Involvement of Consultations with traders 0.67 the trade community Source: OECD, 2015 Figure 9: Comparison of Mozambique s performance on OECD TFIs between 2012 and 2015 Source: OECD, 2015 ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 16

27 Figure 10: Comparison of Mozambique s performance on OECD trade facilitation indicators against regional and global standards Source: OECD, 2015 As shown in Table 8, Mozambique performs poorly in the OECD TFIs, only scoring the maximum two points in external cooperation with other border agencies, and its progression since 2012 is mixed. While performance has improved in the areas of fees and charges, streamlining of procedures, and external border agency cooperation, the country performs badly on three indicators: information availability, advance rulings (with a score of 0), and governance and impartiality. Governance and impartiality, which promotes effective sanctions against misconduct by border officials, supports the customs ethics policy, provides an internal audit mechanism for border agencies, and publishes annual customs activity reports (OECD website); however, it is a difficult issue to tackle since it requires strong political will. This issue, extensively raised in the interviews, will be discussed later in the report. Based on this assessment, potential areas of improvement could therefore include information availability, advance rulings, and customs formalities (documents, automation, and procedures), which fall well below regional standards. This will also be discussed in the light of the current projects implemented by the government, including the Single Electronic Window. World Economic Forum Global Competitiveness Index Of all the indices measuring a country s performance, the WEF Global Competitiveness Index (GCI) is regarded as the most comprehensive, although it does not attempt to provide a global value chains analysis. The report includes 114 indicators grouped under 12 pillars; Mozambique s performance is shown in ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 17

28 Table 9. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 18

29 Table 9: World Economic Forum Global Competitiveness Index Mozambique (2015) Global competitiveness indicators Mozambique s score Mozambique s rank 1st pillar: Institutions nd pillar: Infrastructure rd pillar: Macroeconomic environment th pillar: Health and primary education th pillar: Higher education and training th pillar: Goods market efficiency th pillar: Labor market efficiency th pillar: Financial market development th pillar: Technological readiness th pillar: Market size th pillar: Business sophistication th pillar: Innovation Source: World Economic Forum, 2015 Of the 12 pillars, seven are relevant to TFA implementation, with the 6 th pillar (goods market efficiency) being the most important. On aggregate, Mozambique scored 3.9 out of 7 on this pillar, making it the 118 th best performing country out of the 140 measured. In terms of the burden of customs procedures as an indicator of the 6 th pillar, Mozambique scored 3.5 out of 7, making it the 100 th least burdensome country in the study. Another indicator worth mentioning is the prevalence of non- tariff barriers, for which Mozambique ranks 109 th (with a score of 3.9). 2.6 Domestic Processes for Trade Facilitation Mozambique has ratified the WTO s Trade Facilitation Agreement. In June 2016, with the technical assistance of SPEED/USAID, the Government of Mozambique prepared a report proposing a categorization of its commitments. 10 The categorization into three groups A, B, and C of a total of 41 provisions is provided in 10 Trade Facilitation Agreement in Mozambique, Categorization and Next Steps, June Government of Mozambique. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 19

30 Table 10. The table shows both the category and an estimate for the implementation timeline for the B and C provisions. The report concludes that 24 measures were deemed to fall within Category A, seven within Category B, and 10 within Category C. Of the Category B provisions, six can be implemented within one year, and one within two years. Of the Category C provisions, one can be implemented within one year, two will need three years, and seven more complex ones will need five years to be implemented. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 20

31 Table 10: Categorization of TFA by Mozambique s government, June 2016 No Provision Category / Deadline (years) 2.1 Opportunity to Comment and Information before Entry into Force A 4.1 Right to Appeal or Review A 5.1 Notifications for Enhanced Controls or Inspections A 5.2 Detention A 6.3 Penalty Disciplines A 7.1 Pre- arrival Processing A 7.2 Electronic Payment A 7.3 Separation of Release from Final Determination of Customs, Duties, Taxes, Fees, and Charges A 7.4 Risk Management A 7.5 Post- Clearance Audit A 7.7 Trade Facilitation Measures for Authorized Operators A 7.9 Perishable Goods A 9 Movement of Goods Intended for Import under Customs Control A 10.1 Formalities and Documentation Requirements A 10.2 Acceptance of Copies A 10.6 Use of Customs Brokers A 10.7 Common Border Procedures and Uniform Documentation Requirements A 10.9 Temporary Admission of Goods for Inward and Outward A 11.4 Non- Discriminatory Transit A Transit, Procedures A Transit, Guarantee in the Form of a Surety A Transit, Cooperation and Coordination A 12 Customs Cooperation A 1.1 Publication B1 1.2 Information Available Through the Internet B1 1.4 Notification B1 5.3 Test Procedures B1 7.6 Establishment and Publication of Average Release Times B Use of International Standards B Rejected Goods B Committee on Trade Facilitation C1 1.3 Enquiry Points C3 6.1 General Disciplines on Fees and Charges Imposed on or in Connection with Import and Export C3 ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 21

32 2.2 Consultation C5 3.1 Advance Rulings C5 6.2 Specific Disciplines on Fees and Charges Imposed on or in Connection with Import and Export C5 7.8 Expedited Shipments C5 8 Border Agency Cooperation C Single Window C Pre- Shipment Inspection C5 Source: Trade Facilitation Agreement in Mozambique, Categorization and Next Steps, June Government of Mozambique As per the methodology used for this research, the assessment focused on the Category C measures. It is worth mentioning that the National Committee on Trade Facilitation, noted as a Category C measure, was implemented within one year after the entry into force of the TFA, being created in 2016 after the publication of the TFA report in Mozambique, Categorization and Next Steps. It convenes every other month. The project team intends to present the conclusions of the present report to a meeting of the Trade Facilitation Committee. 2.7 Synthesis of Literature Review Measures at the domestic level The review of the existing literature emphasized the following priorities to be addressed, supported by technical and financial assistance. First, the infrastructure efficiency of the port and related infrastructure; logistics competence, infrastructure, and exports times and costs were highlighted both by the LPI index and the DBI for trading across borders. As of today, trade is undeniably hampered by the inefficiencies of the ports, especially the Nacala port, as will be detailed later, as well as inefficiencies along the logistics corridors, namely Maputo, Beira, and Nacala. These inefficiencies are driven by a number of parameters, among which are the underuse of existing railways, the lack of efficient intermodal cooperation and operations, and additional facilities within the ports themselves. This measure includes stronger internal cooperation between entities that used to be operated by CFM in the past and are now operated as independent public- private vehicles or state- owned enterprises. This first priority was discussed in detail with the panel of interviewees. The removal of non- tariff barriers is another priority. They include pre- shipment inspections (mentioned in Category C of the government s categorization), as well as the scanning fees in the special export terminal in the Nacala port. Another closely related measure is risk management, which was discussed in terms of both the systems and operators in the trade and logistics chain. Based on the C- categorization of the government, and despite the reference to this measure as making a big improvement to Mozambique s trade, the National Single Window appears to be a strong priority to boost Mozambique s capacity in this regard. Indeed, this measure, launched in 2013 and progressively implemented throughout the country, is still in the process of integrating further functions and streamlining existing processes. This measure can bring significant improvements to trade, and therefore remains a priority for Mozambique. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 22

33 Priorities at the regional level While Mozambique performs very well on border agency cooperation according to the OCED assessment, it remains an important issue for the country. This is not only because of traditional trade with South Africa, which is Mozambique s major trading partner, but also because of transit cargo, a major economic activity for Mozambique s logistics and trade infrastructure. As a result, it appears essential to assess the margin of improvement of border cooperation with South Africa and Zimbabwe, Mozambique s two main trading partners in the region. During the interviews, special emphasis was placed on the border with South Africa; complaints remain common from truck associations regarding waiting times at the Ressano Garcia border post. In addition, regional cooperation with South Africa is regularly brought up by all the stakeholders of the Maputo Corridor Logistics Initiative (MCLI), a cooperation corridor between Mozambique, Swaziland and South Africa that is yet to reach its full potential. In addition, this study builds on the results and outcomes of other regional surveys within the SADC region, which highlight criticism directed at South Africa for its failure to implement measures that truly support regional integration. Although SADC has been able to reduce tariff barriers, it has been less successful at reducing NTBs; they are the most problematic because they constitute ad hoc policy changes. Other ongoing regional challenges include a lack of political will to implement strategic regional projects to address infrastructure deficiencies. Finally, there are differences in the level of ambition among SADC members (i.e., some member states are more dependent on tariffs than others), while national sovereignty continues to pose ongoing challenges because countries remain concerned about the individual benefits they will accrue, rather than advances that could be shared within the region. Priorities for questionnaire and online survey Based on this assessment, the priorities listed in Table 11 were discussed with the interviewees. These priorities were detailed in the online survey, which was broken up into specific measures in order to target actions to be implemented. Moreover, additional measures were added to the online survey in order to examine governance and impartiality as well as documentation formalities, which were both assessed as critical to Mozambique in the literature review. Finally, the advance rulings measure, which ranked poorly in all the indices that measure it directly, appears to be an important measure to address. However, this measure was rarely mentioned as a priority during the interviews. Table 11: List of priorities discussed in interviews and assessed in the online survey for Mozambique Interviews Online survey 1. Port and related infrastructure Increased capacity of rail transport for bulk cargo. efficiency Development of behind- the- port facilities and enhanced inter- modal links for transportation. 2. Removal of Non- tariff barriers Removal of non- tariff barriers (such as import quotas, subsidies, customs delays, technical barriers, and other systems preventing or impeding trade). 3. Expanding the Single Electronic Window Expanding the Single Electronic Window s coverage of products and engaging with more government agencies involved in facilitating trade. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 23

34 4. Improved border cooperation, Enhanced coordination of regional transit procedures especially with South Africa and Zimbabwe Improved border management and coordination, including with South Africa or with Zimbabwe 5. Risk Management Stronger risk management systems a method for customs officers to implement improved risk management practices and tools so they do not have to examine 100 percent of shipments, but apply their scarce resources to more risky imports determined by an assessment of the past compliance level of a trader. More efficient coordination among all agencies involved in processing traded goods, including the processing of licenses and certifications, streamlining of inspections, etc. Greater discipline on fees and charges (general and specific). 3 Findings 3.1 Ranking Trade Facilitation Measures in Terms of Priority This section starts by presenting how the assessment participants ranked the TFMs. The analysis addresses Assessment Question 4, and is based on findings from both the interviewees and the online survey with the aim of examining the relative importance that members of the wider Mozambique trading community place on different TFMs. Table 12 details how many times a specific TFM was raised as a priority across the respondent categories during the interviews. This information was used to select TFMs that were then examined in detail to answer Questions 1 through 3 in the report. In total, 18 key informants were interviewed (KIIs), of whom 13 were from the private sector representing more than 70 percent of the interviewees. The composition of the KII panels is as follows: 12 KI from the private companies; 1 KI representing a private association; 3 KI from the public administration; and 2 KI representatives of international institutions and public policy experts. These 18 KII were complemented by a series of five background interviews from all sectors. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 24

35 2: Frequency of Specific Trade Facilitation Measures, raised as a priority during the Interviews Final list of priority TFMs for Mozambique Desk review priorities Private - firm Private - association Public agency Improved border management and coordination Y Removal of non- tariff barriers Y Expanding the Single Electronic Window Y Development of behind- the- port facilities and associated transport infrastructure Y Internal coordination among all agencies involved in processing traded goods N Enhanced coordination of regional transit procedures N 2 1 Stronger risk management systems Y Greater discipline on fees and charges (general and specific) Y 3 1 Advance rulings N 1 1 Better consultation with the private sector N International agency / Academic / policy expert MENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA

36 The respondents to the online survey were also asked to rank TFMs in order of importance to their businesses. Figure 11 shows how the respondents classified eight TFMs in terms of high, medium, or low priority for their business. Figure 11: How Online Survey respondents rated the eight selected TFMs as a priority for implementation in Mozambique, Mean Weighted Priority (N=10) Mean Weighted Priority Enhanced coordination of regional transit procedures 2,11 Stronger risk management systems Development of behind the port facilities and enhanced inter- modal linkages for transportation Expanding the single electronic window coverage of products and involving more government agencies involved in Increased capacity of rail transport for bulk cargo Improved border management and coordination Greater discipline on fees and charges More ef<icient coordination among all agencies involved in processing traded goods Removal of non- tariff barriers 2,38 2,44 2,50 2,56 2,56 2,67 2,67 2,78 0,0 0,5 1,0 1,5 2,0 2,5 3,0 ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 26

37 Figure 12: How Online Survey respondents rated the eight selected TFMs as a priority for implementation in Mozambique Priority votes per TFM Improved border management and coordination Increased capacity of rail transport for bulk cargo Removal of non- tariff barriers Expanding the single electronic window coverage of products and involving more government agencies involved in facilitating trade Development of behind the port facilities and enhanced inter- modal linkages for transportation More ef<icient coordination among all agencies involved in processing traded goods Enhanced coordination of regional transit procedures Stronger risk management systems Greater discipline on fees and charges High priority Moderate priority Low priority Figure 13: How Online Survey respondents ranked the eight selected TFMs against each other as a priority for implementation in Mozambique, Mean Weighted Ranking (N=10) Mean Weighted Ranking Improved border management and coordination 3,80 Expanding the single electronic window coverage of products and involving more government agencies involved in facilitating Removal of non- tariff barriers Greater discipline on fees and charges Stronger risk management systems Increased capacity of rail transport for bulk cargo 4,56 4,56 4,60 4,86 5,00 Enhanced coordination of regional transit procedures 5,56 More ef<icient coordination among all agencies involved in processing traded goods Development of behind the port facilities and enhanced inter- modal linkages for transportation 6,25 6, ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 27

38 Figure 14: How Online Survey respondents ranked the eight selected TFMs against each other as a priority for implementation in Mozambique, N= Rank 9 Rank 8 Rank 7 Rank 6 Rank 5 Rank 4 Rank 3 Rank 2 Rank 1 Using the above data, the assessment team developed rankings for the TFMs in answer to Assessment Question 4. Table 13 shows the two sets of rankings. Table 13: Final TFM rankings for the two data sets (highest to lowest) Ranking TFMs by priority for implementation in Mozambique by KII respondents 1. Development of port facilities and associated transport infrastructure 2. Removal of non- tariff barriers 3. Improved border management and coordination 4. Internal coordination among all agencies involved in processing traded goods Ranking TFMs by priority for implementation in Mozambique by online survey respondents (normalized average of the weighted scores) 1. More efficient coordination among all agencies involved in processing traded goods (internal coordination) 2. Development of behind the port facilities and enhanced inter- modal linkages for transportation (infrastructure) 3. Removal of non- tariff barriers 4. Greater discipline on fees and charges 5. Increased capacity of rail transport for bulk cargo (infrastructure) 6. Expanding the single electronic window coverage of products and involving more government agencies involved in facilitating trade 7. Stronger risk management systems 8. Enhanced coordination of regional transit procedures 9. Improved border management and coordination ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 28

39 Analysis of Rankings in Online Survey To maintain anonymity of respondents the data cannot be discussed in detail, rather high level aggregated observations are made. In total 27 people responded to the survey, however only 15 of the 27 responses were complete with the remaining 12 being only partially completed or disqualified due to operations being limited to the domestic market. Respondents, when asked about the reach of their operations to neighboring Southern African states, included Zimbabwe, South Africa, Swaziland and Zambia. Unfortunately, none of the respondents operate in Mozambique s other neighboring state Malawi or regional neighbor Botswana. As for the quality of responses, measured by the reported seniority and title of the respondent, it seems that the survey was answered by high ranking members, indicating that it was well received and the responses are likely of high quality. Seven responses were from CEOs, five from someone at manager level, three at director level, one advisor and one consultant. From the 27 responses, 10 indicated that they do operate across border; and the population of 27 respondents included those that operate in multiple disciplines relating to cross border trade including importing, exporting, transportation and shipping, freight forwarding and customs clearance, port storage, trade promotion, representing business associations and working at non- profit organizations. The sample also covers a multitude of economic sectors from agriculture to financial services; although the majority of respondents operate in the transportation sector. The size of respondent companies ranges from small to very large, most from companies with more than 100 employees; and in terms of turnover the majority of respondent companies have a turnover of more than $1 million per year. The survey recorded the 10 respondents, operating across borders, priorities on two separate occasions. The first question asked respondents to indicate whether they perceive the predetermined nine TFMs as high, medium or low priority to improve the trading environment, the exact question follows: "Based on initial research the assessment team has identified the following trade facilitation interventions that could be implemented in Mozambique with a view to improving the trading environment. Considering the potential of each policy to generate positive beneficial impacts for your business, would you recommend it to be a high, moderate, or low priority to implement in your country? The second question asked respondents to rank the nine TFMs according to their priority to impact their business, the exact question follows: "Considering the potential beneficial impacts for your business, please rank the identified trade facilitation policies in order of your priority for Mozambique The results of both these questions are graphed in Figure 11 and Figure 13. By normalizing and averaging the results the list of priority TFMs were calculated, as displayed in Table 13. Additional text responses were allowed for respondents who identified one or more of the TFMs as high priority to elaborate on their views. The responses follow: "Rail transport will reduce the cost of importing bulk goods. Improved border management will reduce the seepage of goods into the informal market. Improved regional transport procedures will ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 29

40 reduce the time of delivery and will reduce minimum stock levels. Removal of non- tariff barriers will make the market more accessible and more competitive. Enhance capacities at the port will reduce the time lag & discharging rate." From my perspective, the port of Nacala lacks coordination and systems. The port itself seems to lack modern management systems - accounting, operations, etc. Those agencies who work in the port also seem to have no linked systems (phyto, COO, etc) and no resources to develop them. Together these two factors often lead to delays, confusion, increased opportunities for mistakes or fraud. In the case of discipline on fees we have a serious problem in Mozambique. The Government normally outsource to private sector most of the services related to trade facilitation because it doesn't have money to invest. Those operators seek profitability and they apply fees to have returns. At the end of the process the infrastructure doesn't contribute to make Trade Facilitation easy as was the initial idea. These kind of systems tend to decrease the boarder management because those operators see each other as opponents and the opportunity not to perform a service but to make profit. "Rail: rail between Mozambique and SA is mostly very low, very slow, very expensive and there seems to be limited will from CFM or Transnet to improve rail logistics. However, a port cannot grow continuously on road transport alone. Lack of compliance of some infrastructures, such as port quay walls, docks, petroleum terminals, are a form of non- tariff barrier. Mozambique ports have some of the highest fees in the world. Six times more expensive than the regional average. For Liquid bulk petroleum products, CFM charges by a very wide margin, the highest fee in the world. This hampers Mozambique's logistics competitiveness vs. Dar es Salaam, Richards Bay and Durban, but also Walvis Bay and in the future, Lobito." Respondents were also asked to share experiences in trading or moving goods across borders that affected how they ranked the trade facilitation policies. The two following responses were recorded: "Generally every aspect can improve of course. Some aspects aren t so bad in our view, notably transit procedures and coordination between SARS and Alfandegas has vastly improved. We would like to see the hypocrisy around rail transport end. Rail transport is being hampered for political reasons, notably the strength of the road transport lobby, and protectionism of the national rail companies, both translating into rail tariffs so high that they disable trade. Other improvements such as turning the border into a single stop, or taking out the useless clearing agents from the process, seem too much to ask for the next decades or so, but would be ideal." The times spent along trade corridors and at borders have a big impact on costs for the shipper. integrated systems contribute to the seamless flow of goods across borders, thus minimizing the need for multiple inspections. General Observations on the Interviews The overall purpose of this research was to focus on the priorities of the private sector in relation to trade facilitation. The high proportion of private sector stakeholders that were interviewed was deliberate and does not indicate a lack of interest or willingness to engage from public sector officials. It is worth observing ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 30

41 that in some instances the TFMs covered in the interviews often had to be explained in some detail. The interviewees demonstrated very good knowledge of the challenges or obstacles to trade but often did not make the connection to the associated TFMs. This was possible through the semi- structured approach to the interviews that was adopted. On the ranking of the priority TFMs from the interviews, infrastructure remains a problem, mostly in terms of management and coordination amongst operators (intermodal cooperation, at ports and border posts) and there is need for better coordination between different agents at various points. Infrastructure development is still a high priority for Mozambique and the government is pursuing the development of new ports and airports (example of Xaixai). The key for private sector interviewees is better management of the existing infrastructure as well as the new infrastructure that is coming on line. The removal of non- tariff barriers (NTBs) is unsurprisingly a high priority in both the interviews and online survey. There is however significant variance among private sector representatives as to what exactly is an NTB. The technical definition is not well appreciated and there is a tendency for traders to lump a wide range of challenges into the NTB category (from infrastructure constraints to corruption to administrative issues). For the purposes of this research, the definition adopted is taken from the Tripartite NTB Monitoring Mechanism, available at Risk management is a term that is more widely understood by interviewees and only once was it wrongly perceived as the threat of security challenges for trucks. In the context of Mozambique, risk management is often linked in the minds of private sector representatives to the Single Electronic Window. This process is viewed as being critical to the development of appropriate risk management systems and processes in Mozambique but it has not yet been fully implemented. There have been reported incidences of truck hijacking and security threats against trucks in Mozambique in recent years, particularly in the more northern parts of the country where there have been simmering political tensions. This was also a challenge reported by South African transporters in the context of the country study there. The interviewees in Mozambique were clear however that other priorities come first, even if they currently have the inconvenience of needing to use escorts and other measures to prevent the theft of cargo. 3.2 Key Obstacles and Challenges to Trade This section summarizes the findings from across the KII respondent categories about the key obstacles, constraints and challenges to cross- border trade in Mozambique. The KII respondents mentioned a wide range of issues due to the open- ended nature of this question in the research methodology adopted for this study. Many of the issues are also closely linked to the priority TFMs identified by KII respondents. This section does not seek to rank or prioritize the obstacles, they are presented in the order of frequency that they were mentioned by KII respondents. Cooperation with customs officials: Almost all KII respondents, 11 from both the public and the private sectors, referred to customs as a key challenge facing Mozambique, both in the area of exports/imports and 11 Personal communication with two logistics companies in Maputo on Dec. 9 and 10, 2016, and from bilateral agencies on Dec. 19 and Jan. 19, ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 31

42 transit operations, and in the hinterland border posts and at the three major ports of Maputo, Beira, and Nacala. While KII respondents mostly agreed on the relevance and adequacy of the customs procedures in place and acknowledged that there had been marginal improvement, they said that they found it difficult to cooperate with customs officials throughout the country, and often face demands for bribes. In the absence of a monitoring or accountability system at the borders, customs officials enjoy discretionary powers, especially in the port of Nacala, on a variety of procedures (e.g., cash payment requirement, the printing of documents). According to private sector KII respondents, this challenge has become all the more salient in the current economic context, with the delays in the payment of the salaries of civil servants in Mozambique, as well as the decrease in cargo traffic. Non- Tariff Barriers: On a related note, almost all KII respondents described NTBs as a key challenge. They make trade more unpredictable, with new barriers emerging all the time. In addition, they appear to mean different things to different people, and KII respondents provided many examples that have different impacts on trade and therefore require different solutions. More detail is included in the section below on NTBs, but some key obstacles mentioned include: Special trade barriers specific to Mozambique: scanning fees charged by private operators (falling outside the specific procedures for fees and charges) at the Special Export Terminal in Nacala Port TEEN, and the KM4 terminal at Maputo Port. The exchange rate determined by the customs authority, which is passed on to the Single Electronic Window and other charges at the ports. Corruption and bribery, including informal fees and charges, as mentioned previously. 12 Bureaucracy: Half of respondents mentioned bureaucracy as a challenge in Mozambique. When asked specifically about the costs of red tape, such as clearance times and customs processing delays, private operators admit that delays were improved by the implementation of the Single Electronic Window, and that the current delays are generated more by NTBs in the present economic context. However, there remains a perception of a heavily bureaucratic system in Mozambique, which is a key challenge to trade with foreign partners. Forwarding agents admit their key role in Mozambique in that regard. 13 Cost of Trade: In addition to the challenges mentioned previously, logistics costs, transportation costs and time, and port efficiency contribute to the overall perception of a high cost of trade 14 and more generally, a high cost of doing business. 15 Two private sector KII respondents estimate the cost to export their commodities adds up to 60 percent of the total value chain costs, which is confirmed by the SPEED reports. 16 Exporters and stakeholders involved in transit operations consider that the railway in Mozambique is extremely underused and could significantly reduce the costs of transportation, compared to the road network, which is the prevailing means of transport in Mozambique and regionally. As detailed 12 Personal communication with an agriculture commodities exporter in Maputo on Jan. 26, 2017 and a logistics company on Dec. 12, Personal communication with a logistics company in Maputo on Dec. 12, Out of five personal communications with KII respondents between December 2016 and January Out of three personal communications with KII respondents between December 2016 and January Selected Trade Issues for Mozambique in USAID / SPEED. Published May 5, Price Variations in Mozambique. USAID / SPEED report, published in March ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 32

43 below, Mozambique inherited several railway lines from colonial times, most of which have been rehabilitated over the past five to 20 years, except for the Ressano Garcia line (in the Maputo corridor). The overall opportunity cost of not using the railways for long- distance or heavy hauling was also mentioned by public sector representatives. On a separate note, in addition to high port fees and charges in Mozambique (one KII respondent mentioned that Mozambique s ports are among the most expensive in Africa), port inefficiencies create additional costs for some operators. In one example, economic agents hire specific staff to monitor the handling of empty and full containers all the more so for perishable goods. 17 These overall costs of trade, both perceived and real, come at a huge cost for Mozambique; Malawi, for instance, prefers shipping its cargo through Durban instead of Maputo. 18 Two other respondents also mentioned logistics and port inefficiencies as a binding constraint for business development, as detailed later. 19 Internal Coordination among Agencies: The other priority obstacles were largely about the soft infrastructure that supports trade in Mozambique and the region. For example, both private and public sector KII respondents spoke of the lack of coordination between different government agencies and limited connectivity between government IT systems. The lack of coordination was mostly reported by KII respondents who deal with the country s ports, whether it be for port- specific procedures (e.g., internal coordination for the Single Electronic Window) or port agency working hours (e.g., differences in operating hours between the port terminals, customs agents, etc.). Another set of concerns relates to intermodal cooperation (e.g., railway and ports operators, particularly in the port of Maputo). KII respondents spoke less about the need for investment in new trade- related infrastructure (the necessity of a one stop border post was raised only once, and weighing scales were raised by two respondents) than about the operation of the existing trade- related infrastructure and improvements to the various modes of transport. Coordination at Borders: While most concerns were primarily raised at the domestic level, KII respondents also expressed concerns about the lack of connectivity and coordination with South Africa and to a lesser extent Zimbabwe. Connections with Zambia, Swaziland and Malawi where not specifically mentioned. For example, information cannot be sent electronically between the two customs systems at a border post, which increases the administrative burden for traders because they need to file documents multiple times. Respondents most frequently mentioned the Ressano Garcia border post between South Africa and Mozambique. In addition, traders and agro- industry representatives mentioned the prevalence of the informal trade market in Mozambique, fostered by the porosity of the border with South Africa, and the lack of monitoring of these borders. Economic agents identify infiltration goods, illegally imported from South Africa on a large scale, as a major source of unfair competition with formal and legal businesses. 3.3 Other Constraints to Trade This section presents other constraints to trade unrelated to specific TF policies or interventions as identified by Mozambican KII respondents. They include the current economic climate that impacts all 17 Personal communication with two agro- commodities exporters in January Personal communication with Bilateral agency, Dec. 15, Confirmed by several reports, including Maputo Port Citrus Operations and Logistics Cost Assessment, Citrus Growers Associations (CGA), Personal communication with perishable goods company on Jan. 26, 2017 and an agro- industry company on Jan. 22, ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 33

44 businesses, such as the lack of USD reserves, the difficulty of accessing capital due to very high interest rates, and the requirements of a cumbersome legal framework experienced by foreign companies. Absence of a Vision/strategy for Trade: A third of the KII respondents referred to challenges facing Mozambique due to a lack of strategic vision for trade at a national scale. According to these respondents, the absence of trade strategy papers and industrial policies, and the emphasis in public discourse on domestic production and consumption over trade and transit issues, trickles down to all layers of trade operations. Examples ranged from political interference in infrastructure- facilities management (e.g. the political appointment of directors of transport companies, and favouring public control over business managing and development) to the perceived low political will to expand trade and attract new lines of business cargo to the region through the Maputo port. 20 The absence of a shared vision also impacts internal coordination, both on the public side as well as in the private sector. According to four KII respondents, the private sector fails to coordinate and act in a concerted way to propose policy or procedure changes in logistics and trade. Of the KII respondents, three 21 consider that private sector associations have no impact; one of them acknowledged, however, that the private sector itself was very fragmented and competitive, with no real will to work together. A fourth KII respondent mentioned that the impact of such associations could be greater, citing the example of the Cotton Association, which had managed to successfully implement 11 procedures for the sector. 22 Discrepancies in the Country: Structured around three development corridors, with the hinterland with only one vertical road link (the North- South N1 along the coast), Mozambique is administratively and economically very fragmented. While this fragmentation is perceived by all businesses that operate nationally, this is all the more true for trade agents, who are affected by the discrepancies in terms of the cost and time to go between different regions. One of the most salient examples raised by two KII respondents is the difference in procedures between the Maputo and Nacala ports, which exist despite the national legislation, procedures, and regulations in place. These discrepancies, stemming from the challenge of implementing nationally the TF measures over such a fragmented territory, increase the low predictability of trade operations in Mozambique and the transparency for new trade partners. Training: A third of KII respondents mentioned the low skills and poor training of trade operators in Mozambique. This issue was mostly raised by respondents from the public sector, who identified a broad need for training, whether for the current operations of the Single Electronic Window or the upcoming improvements to the systems. Training in risk management and commercial relationships (e.g., the ability of customs officials to understand and respond to private operators constraints) was mentioned as well. Lack of Commitment to Regional Integration by South Africa 23 : There were also complaints about the fact that South Africa does not appear to want to operate in conjunction with Mozambique. Some KII respondents from both the public and the private sectors claimed that the inefficiencies of the Ressano Garcia rail line or the deadlock over railway operations in the Maputo corridor were the result of a lack of 20 Personal communication with logistics company on Dec. 14, Personal communications with a logistics company on Dec. 12, and an agro- industry company and an agriculture commodity trader on Jan. 25 and Jan Personal communication with an agro- industry company on Jan. 15, This is also reflected in the South Africa country assessment report. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 34

45 willingness from South Africa to cooperate with Mozambique. As previously mentioned, the porosity of the South African border, allowing the infiltration of goods into the Mozambican market tax- free, is another issue that respondents perceive to come about as a result of a lack of commitment to regional integration by South Africa. Moreover, South Africa is perceived as implementing non- tariff barriers on Mozambique, unlike other neighboring partners (e.g., the difficulty of exporting seeds to South Africa compared to Malawi, and South Africa s refusal to accept partial shipments). Based on these observations and perceptions, the same KII respondents were pessimistic about any improvement to trade within the region without South Africa s cooperation, from the legislation about the standardization of the Single Electronic Window to the operationalization of the railway line. 4 Assessment Questions 1-3: The findings of the TFMs This section presents the findings for Assessment Questions 1 through 3, for each of the four TFMs selected as priorities for implementation in Mozambique improvement in port facilities and associated infrastructure; removal of non- tariff barriers; improved internal coordination; and improved border management coordination. The frequency measures how KII respondents prioritized the TFMs, as detailed in Table 9 above. 4.1 Trade Facilitation Measure Priority #1: Improvement of port facilities and associated transport infrastructure As noted previously, the WTO TFA does not specifically address physical infrastructure construction or upgrades as a separate TFM. The SADC TFP prioritizes improving the efficiencies of seaports as a TFM for the region. The proposed activities at the regional level relate largely to assessing the processes at seaports and improving the time taken to clear cargo through seaport facilities. For the purposes of this study, the TFM on seaports has been broadened to include hard infrastructure issues that are connected to transport and trade. This TFM deals with the efficiency of seaports as well as other linking and supporting infrastructure. In the context of Mozambique, this includes the KM4 terminal at the port of Maputo, and the Special Export terminal (TEEN) at the port of Nacala. There is some overlap with the TFM on rail and road infrastructure because they are part of the links to seaports that could be improved to ensure the overall efficiency of transport systems. KII Findings Summary KII respondents identified several obstacles related to this TFM, which vary depending on the area where they operate in Mozambique. One common concern is the low use of the railway lines even for heavy bulk cargo, to the benefit of road transporters. KII respondents who mentioned this inefficiency said that it was due not only to the lack of political vision in logistics and the strength of the road transporter lobby, but also to the absence of adequate links to the respective ports. The absence of sufficient weighing stations within the port was also a general concern. Finally, respondents also lamented the absence of an efficient and reliable cold chain throughout the country. The case of the Nacala port was extensively discussed by all KII respondents who operate within the Nacala ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 35

46 corridor (four KII respondents from the private sector). They did acknowledge the recent improvements to the port of Nacala, further to the development investments financed by the Japanese International Cooperation Agency (JICA), 24 which increased from 13 to 90 the number of plugging stations for temperature- controlled containers, and the installation of generators. However, the management of the port by unskilled operators who do not understand the constraints of private businesses was mentioned as the highest concern by the four KII respondents. Two gave the example of the management of full and empty containers - after experiencing massive delays in getting the empty containers on time, the companies involved hired dedicated staff to operate these containers within the port. 25 This concern was expressed for both the export of commodities (getting the empty containers back on time for the collection of perishable goods) and the import of fertilizers and seeds from South Africa, which at one point were delayed by 14 days in the port of Nacala. Both KII respondents insisted on the importance of building long relationships with port operators to ensure favourable treatment of their perishable and semi- perishable goods. Regarding the port of Maputo, the overall operation is judged to be satisfactory, due to the private management of the container terminal by a company from Dubai, although two operators deplored the absence of competition and hence performance incentives for this operator, especially considering the competition with the South African ports of Durban and Richards Bay. As mentioned previously, competition faced by the port of Maputo from the ports in South Africa was the greatest concern for transit operators. The poor use of the existing Ressano Garcia rail line was mentioned by two KII respondents as a major impediment to Maputo s competitiveness and as a result, limited the use of the Maputo corridor as opposed to South African options for cargo transit from hinterland countries. One respondent from the public sector mentioned the low capacity of the railway line, at about 6.5 million tons of cargo, while the capacity of the port of Maputo exceeds 20 million tons per year. The economic cost of the use of the roads instead of the use of the railway in Mozambique was a concern raised by KII respondents from the public sector and international institutions. It can be further noted that the limited capacities of the ports of Beira and Maputo were mentioned by three KII respondents as a constraint that required heavy maintenance operations in the respective bays (e.g., the recent dredging contract for Maputo was estimated at USD 100 million). However, this limited capacity, which is very well known by all economic agents and mentioned by all KII respondents dealing with port operations (10), was not a priority for the KII respondents. The poor management of the port was a higher constraint, which could be tackled by the appointment of business- oriented managers instead of political technocrats, as mentioned previously. 26 More generally, KII respondents who mentioned this TFM mentioned the lack of maintenance of the roads and railways, and the poor planning of links with ports. This lack of intermodal vision was mentioned by three KII respondents (two from the public and one from the private sector). 24 Personal communication with agro- industry producer over the phone on Jan. 26, Note that in both cases, this was the subject of long negotiations with the port of Nacala. 26 Personal communication with two KII respondents from the private sector, in December 2016 and January ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 36

47 Assessment Question 1: What is the Potential Range of Benefits Associated with the Implementation of Trade Facilitation Measure Priority #1? Of the 18 KII respondents, 15 raised the need for the improved efficiency of and infrastructure upgrades to seaports and linking infrastructure. Ten of the respondents from the private sector who discussed the need for efficient seaports and linking infrastructure considered that it would reduce the time and costs needed to trade, and improve certainty about the time it would take goods to get to the market and about the cost of trading. Two respondents from the public sector and international institutions considered that the change would increase certainty about the time needed to trade more than the cost of trading. Fourteen out of 15 respondents considered that this measure would result in an increase in trade volume for Mozambique. Assessment Question 2: What is the potential range of costs associated with the implementation of Trade Facilitation Measure Priority #1? KII respondents did not provide clear estimates on this issue. A total of 13 out of 15 respondents insisted on the need to better manage the existing infrastructure, rather than invest in new facilities. One respondent even mentioned the risk of focusing on physical infrastructure, which was a source of inefficiencies in his opinion referring to the KM4 facility as an example. As a result, the majority of KII respondents considered that the costs associated with the implementation of the trade facilitation measure Priority #1 would be limited, and would mostly consist of technical assistance in management and monitoring. Two respondents from the private sector, however, mentioned the need to invest in weighing scales in the ports of Mozambique (mostly in Maputo and Nacala), as well as in other further loading and unloading equipment in Nacala, similarly to the improvements made in Maputo port. In that regard, three KII respondents said that they were using their own staff to cope with these inefficiencies. However, they also said that these investments could be absorbed by the private sector in the event of a future concession contract in Nacala (so far managed by the public company CDN). Given this, the concession of a container terminal recently awarded to a private operator in Nacala Port is seen as a major improvement by three KII respondents. Assessment Question 3: What is the Feasibility and Timeframe of the Implementation of Trade Facilitation Measure Priority #1? Similarly to Question 2, respondents did not provide a clear estimate for the timeframe. A total of 70 percent of respondents mentioned the difficulty in improving efficiency in the ports of Beira and Nacala, which was also supported by complementary background interviews. Seven respondents mentioned that infrastructure managers in Mozambique are mostly political appointees, pointing out the high political implications associated with this TFM 1. As a result, the implementation of this reform could be lengthy and, as a result, more costly. However, four respondents mentioned that the concession of Nacala Port would aid this process, in order ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 37

48 to match the performance of Maputo ports. 4.2 Trade Facilitation Measure Priority #2: Removal of non- tariff barriers The SADC TFP refers to NTBs in the context of TBTs and SPS measures and the Tripartite Trade Monitoring and Compliance Mechanism (the WTO TFA does not refer to NTBs). 27 The TFP notes that there has been a NTB Monitoring and Compliance Mechanism in SADC since This has increased awareness of the NTBs impact on trade in the region, but progress in removing barriers has been slow. 28 One private- sector KII respondent echoed this, noting that while the SADC Trade Protocol reduced tariffs in the region, it had not been effective in addressing NTBs. 29 NTBs cover a wide range of issues, and KII respondents noted that this dynamic area can change over time, making it difficult to anticipate appropriate solutions. KII Findings Summary Twelve Mozambique KII respondents mentioned NTBs as a key constraint, including the following specific impediments: Ten KII respondents, including all representatives from the private sector, one representative of the public sector, and one bilateral agency mentioned corruption, bribes, and informal charges. These respondents noted that corruption was experienced in particular at the country s ports, and especially the port of Nacala. The lack of controls in place at border posts were mentioned by all agents who are directly involved in transportation operations. 30 The overuse of scanners was extensively reported by all private stakeholders and one representative of the public administration. The scanning of all containers and cargo in Mozambique is performed by a private company granted a 15- year concession contract by the Mozambican government to place and operate x- ray scanners at all ports, land borders, and airports, for which it is entitled to charge a fee separate from the port charges. This is perceived as an extra cost that should be absorbed into the port charges. One private- sector respondent provided additional information on the use of scanners at Kilometer 4 (KM4) in Mozambique, 31 which was described as a pick and choose scheme. Scanning is used on all cargo instead of high- risk shipments only. This is similar to the perception of the South African respondents. 29 One result is increased levels of corruption and the bypassing of border scanning by some trucks. Scanning equipment can check one truck every three minutes, but customs officers often still pull trucks over to perform a physical inspection as well. Trucks are also charged an additional scanning fee, regardless of whether they are scanned or not. 27 The SADC established a Trade Monitoring and Compliance Mechanism to monitor the implementation of the free trade area, with a specific mechanism for identifying and eliminating NTBs. The mechanism has the potential to facilitate the movement of goods, leading to increased trade. 28 SADC TFP final draft report (2016): See South Africa report. 30 Corruption is not always considered to be a non- tariff barrier but for ease of presentation of the findings it is included in this section in this assessment. 31 Personal communication with a logistics company in Maputo on Jan. 18, ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 38

49 The imposition of long inspections restricts trade flows and could be resolved in part by a better understanding, training, and implementation by the customs agents of the SEW management system, which already provides for the classification for specific products. In addition, the upcoming integration of additional products into the SEW should improve these bottlenecks, according to the operator of the SEW and the representative of a business association. The lack of coordinated opening hours at the ports was mentioned by two private sector respondents from the agro- industry. The specific case of the Nacala port, which claims to operate 24/7 on its website even though it closes at 9 p.m., was given as an example. 32 In addition, one private sector KII respondent noted that the border between Mozambique and South Africa is not open 24/7, even though the Port of Maputo has these operating hours. Clearances finish at 10 p.m. for passengers and 12 a.m. for cargo, and the border opens again at 6 a.m. 33 Mozambique port fees and charges are denominated in USD, which is perceived in the current context as an impediment by all overseas importers and exporters, as well agents involved in transit operations who were interviewed as key respondents. While this measure is well received by foreign operators, it is considered an NTB for Mozambique s trade operators, who by law have to charge all other services in the local currency. In the current context of the high depreciation of the MT and without an adjustment to these charges based on the depreciation, 34 the USD- denomination is considered a high NTB by operators. One key respondent from the public sector mentioned the option of switching to the rand- denomination of port fees and charges as a mitigation measure and for better integration. On a related note, the special Foreign Exchange rate used by customs and passed on to the SEW charges is an additional NTB, as mentioned by representatives of both the public and the private sectors. 35 Mozambique s customs operate on the basis of a specific metical- USD foreign exchange rate, 2 to 3 points higher than the reference rate issued by the Central Bank of Mozambique. To the respondents knowledge, there s neither a clear justification for this measure nor any clarity on the use of this extra revenue by the administration. The KII respondents also observed the lack of coordination between port operators to raise this issue. One logistics company spoke about the lack of harmonization regulations, including the variations in vehicle standards Personal communication with an agro- industry company over the phone, Jan. 26, Personal communication with a logistics company in Maputo, Dec. 12, Note: The loss of competitiveness of the Maputo port against the port of Durban because of the absence of readjustments to these tariffs, while simultaneously, the rand- denominated Durban port has favourably benefited from the depreciation of the rand against the dollar. The company Grinrod notably diverted its traffic to Durban in Personal communications with an agro- industry company on Jan. 15, 2017, a business association on Jan. 19, 2017, and a public administration representative on Jan. 18, Personal communication with a logistics company in Maputo, January ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 39

50 Assessment Question 1: What is the Potential Range of Benefits Associated with the Implementation of Trade Facilitation Measure Priority #2? The removal of NTBs is a priority for 14 of the 18 KII respondents. During the interviews, specific types of NTBs were discussed in detail and a range of benefits identified. All the private and public- sector respondents prioritized the removal of NTBs, and nearly all respondents who mentioned NTBs as a priority (12) anticipated that removing them would reduce the cost of trading, while 10 believed it would increase certainty about the cost of trading. Across the respondent categories, all agreed that the removal of the NTBs would reduce the time needed to trade, while 10 agreed this TFM would bring about more certainty concerning when goods would arrive at markets. Eight respondents agreed that removing NTBs would increase the volume of trade across borders. Finally, five respondents (including respondents operating in the logistics and transportation sector) noted that the removal of the NTBs would decrease the role and number of intermediary agents, including freight- forwarding agents. Assessment Question 2: What is the Potential Range of Costs Associated with the Implementation of Trade Facilitation Measure Priority #2? This section presents a summary of the findings concerning the perceived cost of implementing the trade facilitation measures. KII respondents lacked knowledge of the cost of implementing most TFMs. The KII instruments put certain questions regarding costs to public- sector respondents, based on the assumption that private- sector respondents would be less informed of the costs to the government of implementing TFMs. The KII respondents mentioned several NTBs and expressed the difficulty of estimating the costs of implementation. However, all KII respondents who discussed this TFM in detail were clear that improvements in NTBs would result in significant benefits and reduce the cost of trade. Reducing corruption or bribery a specific NTB identified by KII respondents has broader benefits for the entire economy. All respondents acknowledged the difficulty of removing these NTBs because they are driven by high political and systemic interests. The majority of KII respondents from the private sector said they had very few expectations regarding any improvement in terms of corruption and other forms of bribery, especially given that the current economic climate is worsening the situation. Increasing staff turnover for customs officials was mentioned by two KII respondents as a non- costly measure. Raising the salary of customs officials and increasing the regularity of their payments was mentioned by two KII respondents, although they recognized that this would come at a very high cost. Assessment Question 3: What is the Feasibility and Timeframe of the Implementation of Trade Facilitation Measure Priority #2? Similarly to the cost estimate, the respondents did not express any clear idea about the timeframe of the implementation of the removal of the NTBs, to the extent that some of them could be implemented overnight, given sufficient political will. The example of the operating hours of ports, and a better allocation of administrative resources to enable 24/7 operation, was provided as an example of a change that would be easy to implement, should the government decide to do so. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 40

51 4.3 Trade Facilitation Measure Priority #3: Improved Internal Coordination KII Findings Summary The majority of interviewees, from both the KIIs and background information panel, mentioned the lack of coordination within the public sector and between ministries of the Government of Mozambique. All respondents from the public sector (3) prioritized the improvement of internal cooperation. Better efficiency, in particular for the offices responsible for different modes of transportation, was highlighted. In the past, CFM coordinated all modes of transportation (railways, ports, even trucking companies, and air transportation). This is now split into different organisations whose incentives are not aligned. More generally speaking, KII respondents, and especially those from the private sector, feel the lack of coordination between all agents along the logistics chain, especially on the supply and distribution chains, including in the private sector. Three stakeholders from the private sector acknowledged the lack of efficiency and synergies between private companies. Two KII respondents mentioned the lack of a culture of cooperation, saying that private corporations saw each other more as an enemy to eliminate rather than a peer to compete against or a potential partner for creative deals and synergies. According to the same respondents, businesses are not used to working and lobbying collectively. Solutions were not easily identified by the KII panel. Formal business associations do, however, exist in Mozambique, the most important in logistics being the CTA and its transportation and trade working committees, and the MCLI (Maputo Corridor Logistics Initiative). Beira Corridor Association and Nacala Corridor Network are among other business associations who plan to improve logistics and trade along the central and northern corridors. However, they are not seen as functional by businesses in these areas. 37 At the centre of the difficulties in private sector cooperation is a reluctance to share data and information, which is seen as a potential threat to a company s business intelligence and intellectual property. Such a level of mistrust is a challenge that can seem difficult to overcome. However, concrete projects such as the National Trade Facilitation Committee or the Single Electronic Window (SEW) were outlined as initial steps to overcome this issue. SEW s future developments require further coordination between ministries. The sharing of the data generated by the SEW could also help all stakeholders along the chain identify potential areas for cooperation. Assessment Question 1: What is the Potential Range of Benefits Associated with the Implementation of Trade Facilitation Measure #3? Only two of the 12 KII respondents who discussed the improvement of internal coordination as a priority considered that it would reduce the costs needed to trade, while all thought that it would reduce the time to trade. Eight said it would improve certainty about the time goods would take to get to market. Six said the change would result in an increase of trade volume for Mozambique. 37 The Consultant was not able to interview them despite many attempts. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 41

52 Assessment Question 2: What is the Potential Range of Costs Associated with the Implementation of Trade Facilitation Measure Priority #3? Assessment Question 3: What is the feasibility and timeframe of the implementation of Trade Facilitation Measure Priority #3? KII respondents agreed that the improvement of internal coordination is a very long process and can be costly in terms of government resources and consultants for technical support. Two respondents estimated the implementation of TFM #3 to 1 million USD. All other respondents found it hard to estimate these costs. Three respondents mentioned that required resources, costs and time could be similar to the EBAU experience Trade Facilitation Measure Priority #4: Improved Border Management and Coordination Coordinated border management (CBM) refers to cooperation between the agencies and authorities within a country that are responsible for the various aspects of border control, as well as coordination among the border agencies and authorities of two countries that share a common border (Articles 8.1 and 8.2 of the WTO TFA). CBM is a tool used to improve management efficiency at borders and enhance TF (SADC TFP, 2016, p. 33). CBM can take a number of different forms, including national efforts to strengthen cooperation among agencies or structures such as joint border committees. KII respondents finding summary In the Mozambican context, KII respondents mentioned two issues when discussing CBM the law enforcement function, and the responsibility to facilitate legitimate trade (including in relation to the monitoring of the infiltration of illegal goods). All respondents who raised TFM4 as a priority focused on either the relationship between Mozambique and South Africa or Zimbabwe. Only one respondent from the private sector also mentioned the border with Swaziland and the need for stronger competition by the Maputo port against South African ports. One business operating in the northern corridor mentioned the border with Malawi as being porous, which induces market distortion along the Nacala corridor. While it is essential to consider these regional dynamics, the large majority of KII respondents and background interviewees focused on the borders with Zimbabwe and South Africa, which makes up the vast majority of Mozambique s bilateral trade (see previous sections). The respondents agreed that much can be achieved without building a joint or one stop border post, which is very costly and time consuming to establish. The streamlining of legislation with South Africa was discussed in this TFM, as well as in relation to the Single Electronic Window. 38 e- BAU is an e- government initiative aimed at creating a one- stop- shop for the registration of companies and businesses in Mozambique, and a number of ministries have started to integrate into the electronic platform. The technical assistance for e- BAU started in 2013, funded by several donors including the African Development Bank through the Investment Climate Facility, and DFID. The integration of the Single Electronic Window with the e- BAU was also raised by the report Trade facilitation Agreement in Mozambique Categorisation and next steps. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 42

53 Assessment Question 1: What is the Potential Range of Benefits Associated with the Implementation of Trade Facilitation Measure Priority #4? CBM was a priority for 11 of the 18 KII respondents (one representative of a government agency did not pick CBM as a priority). These 11 respondents identified a range of significant benefits from CBM. Across the categories, they agreed that it would first and foremost reduce time and increase predictability when crossing the border, especially at the border with South Africa. Four respondents explicitly mentioned the KM4 facility and the closure of the border at night as a source of high inefficiency for trade at the Ressano Garcia border. The porosity of this border, similarly to the border with Malawi, was also mentioned as a concern for competitiveness throughout Mozambican territory. Nearly all the same respondents anticipated that CBM would reduce the cost of trading and improve certainty in this area. Five private- sector respondents also mentioned the benefit of reduced paperwork and administration from CBM. Three respondents noted that there might be increased levels of trade as a result of improved CBM. Assessment Question 2: What is the potential range of costs associated with the implementation of Trade Facilitation Measure Priority #4? Assessment Question 3: What is the feasibility and timeframe of the implementation of Trade Facilitation Measure Priority #4? Only two KII respondents mentioned the building of a joint or one stop border post (OSBP) as a necessary milestone for the implementation of the TFM4, while acknowledging the very high costs involved. When asked about the efficiency of policy measures before or in place of the OSBP, the other respondents said that it could be a less costly and efficient equivalent, since they did not see any possibility of a OSBP being constructed in the foreseeable future. 4.5 Findings on Other Trade Facilitation Measure Priorities Raised by Key Informant Interview Respondents The necessity of implementing a stronger risk management system was cited as a priority by 10 KII respondents. This TFM would help reduce the time needed to trade. According to most respondents, this measure would eventually increase trade volume in Mozambique since it would improve the perceptions of foreign traders concerning trading with Mozambique. As already tackled in the TFM3, the improvement of internal coordination, expanding the SEW to other ministries and administrations (e.g., including licenses, permits, and certificates from the Agriculture and Health Ministries) was raised by almost half of the respondents (8 out of 18). Finally, advance rulings a priority raised by several international agencies for Mozambique, as previously mentioned in Section 4 of this report was raised by six of the KII respondents. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 43

54 5 Conclusions for Ranking the Selected Trade Facilitation Measures 5.1 Priority Trade Facilitation Measures This section presents the assessment team s conclusions for a final ranking of selected TFMs in order of priority for implementation in Mozambique. These conclusions were made based on an interpretation of all the findings across the selected TFMs drawn from various data sources, including a desk review, KIIs and online survey responses, as well as subject matter expertise on these issues. The following is the final ranking of priority TFMs for action in the country: 5. Improved port- related facilities 6. Removal of NTBs 7. Internal coordination 8. Improvement of border management and coordination Drawing on the KII findings in particular, the assessment team ranked first the improvement of port- related facilities. A consensus was reached on the necessity to improve the management and operation of the existing infrastructure, including better coordination among all facilities, rather than expanding or building new infrastructure. Although highly challenging, addressing this measure through better coordination within the management teams, better recruitment and in- house training, and better coordination with other modes of transportation appears to be the most efficient way to reduce the time needed to import and export in Mozambique. The current backlog at the Beira port 39 is an example of the heavy burden the inefficiencies of this infrastructure place on Mozambique s trade, which some operators have called appalling and deterring trade. The removal of the NTBs was ranked second. This TFM offers immediate and tangible benefits, particularly in reducing the costs of transport in Mozambique and regionally. The cost of solutions to several NTBs could be relatively inexpensive which, on balance, led to the assessment team to rank it as the second- most cost- effective issue for attention going forward. The challenge is the dynamic nature of NTBs. 40 This suggests that a nuanced and adaptive approach, short of an agenda that attempts the elimination of all NTBs in the short term, and a focus on tackling a few key issues could result in improved TF, such as the facilitation of coordinated border opening hours and the implementation of a performance management system for customs officials. The third priority TFM for Mozambique concerns the improvement of internal coordination, which we associated partly with the expansion of the SEW to other agencies, and partly with the improvement of dialogue with the private sector. Finally, improvements to border management and coordination is ranked as the fourth priority for Mozambique. This TFM was raised as a priority by all regional countries. While Mozambique might face larger internal challenges than its neighbours, the benefit of implementation of this TFM could be very 39 March 2017: 30- day backlog due to delays in operations. Source: assessment team. 40 As one example, the removal of or decrease in the scanning fees is part of a large negotiation with the private operator. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 44

55 large. It is worth mentioning, however, that this would require South Africa s cooperation for a start, not only for its border post with Mozambique but with regards to the competition of its ports with those of Maputo for countries such as Swaziland, Malawi, and Zimbabwe. 5.2 Non- Priority Trade Facilitation Measures The assessment team identified which TFMs are not a priority for Mozambican respondents as part of this research. While there is no clear distinction of non- priority TFMs, most respondents insisted on the need to make better use of and implement more successfully the existing infrastructure, facilities, and policies. The focus should be less on crafting new policies, and more on ensuring that the existing ones are correctly implemented and monitored. There was, however, a consensus on the need to refrain from building new logistics infrastructure, which would add complexity and inefficiencies along the supply chains. As illustrated by the study conducted by SPEED together with the CTA in March 2016 on the impact of the KM4 facility on trade, 41 users and many of the stakeholders are not concerned with the concept of or the need for a terminal, as such, but rather with the way it is being put into operation. It goes on to say: Is there room for improvement in the operations of international road terminals, so as to leverage competitiveness in international trade and induce growth along the country s development corridors? This is the question. This focus on operation, management, and control of the existing tools and policies can be summarized by this conclusive statement by one KII respondent: Mozambique is endowed with very many resources. It has all the policies in place to reach its potential. The entire responsibility now lies with the human resources who handle this potential Category C priorities As mentioned in Section 4 of this report, the Government of Mozambique has listed the following TFM measures as Category C policies that would require technical assistance and financial resources from the WTO: Committee on Trade Facilitation Enquiry Points General Disciplines on Fees and Charges Imposed on or in Connection with Import and Export Consultation Advance Rulings Specific Disciplines on Fees and Charges Imposed on or in Connection with Import and Export Expedited Shipments 41 Ressano Garcia International Road Terminal (KM4): Potential impact on the Maputo development corridors. SPEED and CTA, March KII interview from private logistics stakeholder, January 2017, Maputo. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 45

56 Border Agency Cooperation Single Window Pre- Shipment Inspection While the Committee on Trade Facilitation has already been implemented, most of the category C priorities were raised by the respondents, specifically or as part of wider barriers to trade. In one example, pre- shipment inspections were mentioned as non- tariff barriers by four respondents, while expedited shipments were touched on by two respondents. Enquiry points were mostly associated with the Single Electronic Window. The discipline on fees and charges imposed on imports and exports was mostly associated with the more global climate of corruption felt in Mozambique, and finally, all private stakeholders mentioned better consultation as key to improving the trade environment and increasing the trade volume in Mozambique. In addition to consistency with the priorities listed by the KII panel, which overlaps with 80 percent of the Category C measures, other measures categorized as A and B were also raised as impediments to trade. Of these, we can note the Category A measure risk management system, which is still seen as a priority by half of the KII respondents. Similarly, while electronic payments are available at the Maputo port and the Ressano Garcia border post, cash payments are still imposed for most operations in the Nacala and Pemba ports. Customs cooperation, considered a B measure, is mostly considered a C measure that requires a lot of technical assistance, strong political will, and a national strategy to tackle. The publication of information, on paper or over the Internet, is another category B measure, which was to a lesser extent mentioned as not having been implemented yet in most border posts. This observation echoes the need to ensure that existing legislation and policies need to be strongly implemented and regulated. Emphasis in that regard should be placed on governance bodies to ensure that these policies are either created or reinforced, if given support in the form of further technical assistance and resources. 6 Recommendations 6.1 General focus Despite some positive developments, freedom of transit within Mozambique continues to pose several hurdles. And according to a large number of stakeholders surveyed for this research, before the coordination at a regional level, it is first and foremost the measures at the domestic level that are judged unsatisfactory, and which have the potential for the bigger return on rapid, non costly and impactful actions. More precisely, it is less the legislation and procedures in place that are blamed but rather their current implementation and operations. The operating systems and reliability of the staff operating them are judged highly unsatisfactory, and urgently in need of a response. This requires a shared strategic vision for the trading environment in Mozambique and training for all those involved in the implementation of plans and policies. It is all the more salient in Mozambique s current trade context, with massive challenges from a depreciated ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 46

57 foreign exchange rate, the absence of dollar reserves, very high banking interest rates and the lack of public investment. Despite these challenges, stakeholders engaged in import, export or transit in Mozambique in the private sector, are in agreement on the necessity to address existing procedures. The need to focus on the implementation of these systems is reinforced by the variance of perceptions and feedback throughout Mozambique. As a very fragmented country, structured around horizontal corridors with no efficient vertical integration, the implementation and operations of procedures and systems vary largely, not so much in the hinterland (at different border posts) but more at the international ports. 6.2 Recommendations for Implementing Mozambique Activities Recommendations to Development Partners Development partners should support the Category C interventions identified by Mozambique in its notification to the WTO under the Trade Facilitation Agreement, with a particular focus on those issues that are a priority for the private sector, such as coordinated border management and full implementation of the Single Electronic Window. Development partners should not ignore some of the trade facilitation measures that have been identified as Category A and B for Mozambique. There is room for interventions in a number of areas such as risk management systems and the publication of information. Development partners should support activities aimed at the elaboration of a comprehensive trade strategy that sets out a detailed vision for Mozambique as a trading partner. This process should include the public and private sectors as well as representatives from the different regions of the country. There is scope of improved coordination between transport and logistics interventions by development partners and sectoral support projects (e.g. in the area of agriculture). This could contribute to an overall improvement in trade facilitation, while also addressing the specific concerns of certain key value chains. Development partners should continue to assist credible private sector associations in Mozambique to build the capacity required to engage in evidence based policy advocacy activities in the area of trade facilitation. Development partners should assist the Maputo Corridor Logistics Initiative and other corridor authorities or organisations in Mozambique to design effective strategies for capacity development and sustainability. Recommendations to the Mozambican Government The Government of Mozambique should elaborate a trade vision and strategy, which is designed with the participation of the private sector, to the extent possible. At the very least the private sector should be involved in the implementation plans and activities for the strategy. The Mozambican Government should build on the creation of the National Trade Facilitation Committee to promote greater coordination and engagement of all agencies involved in trade. There are some useful lessons from the experience of e- BAU that should be built upon in the area of trade facilitation. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 47

58 The Government of Mozambique should implement a performance management system for customs officials that is used as the basis for the identification of additional resources and training requirements. The Single Electronic Window process should be fully implemented and extended to include additional government agencies involved in trade processes in Mozambique. The outsourcing of various trade management services (e.g. scanning) to private sector companies should be evaluated to ensure that the impact is positive with regards to trade facilitation. 6.3 Recommendations for Implementing Regional Activities Recommendations to Development Partners At the regional level, it is recommended that there be stronger coordination amongst all development partners supporting trade facilitation initiatives. This could help in addressing coordination challenges (e.g. between single electronic window systems) and in the exchange of information about the activities underway at the regional level. Development partners should support a corridor- based approach to trade facilitation and infrastructure activities in SADC. This would be beneficial for Mozambique given the need for greater coherence between the approaches of different ports and the challenges of competition in the region. Recommendations to Member States of the Tripartite Free Trade Area 6.4 The Member States of the Tripartite Free Trade Area should redouble their efforts to resolve reported non- tariff barriers. The focus of the infrastructure pillar under the Tripartite process should include dialogue on the effective and efficient management of physical transport infrastructure (not just a focus on the development of new projects). Recommendations for Future Research There are gaps in this research and it would benefit from additional interviews and interactions with small and medium sized enterprises as well as those stakeholders who are based outside of Maputo, particularly in the regions of Nacala and Beira. Development partners should support supplementary research in Mozambique to explore the trade facilitation experiences of the informal sector, including the impact of illegal imports. This research captures the views of formal operators. If this study has not yet already been undertaken, a specific impact assessment on the operation of the border post between Mozambique and South Africa on 24/7 basis would be useful. The data collected by the Single Electronic Window system could form the basis of a number of additional research outputs to identify key trade trends in Mozambique. The analysis could be undertaken across a series of indicators that are useful for both the public and private sectors in the design of new policies and the strategic vision (recommended above). ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 48

59 7 Bibliography Akinkugbe, O. (2009). Trade facilitation and Africa's manufactured goods' export: a panel data analysis. The Journal of Developing Areas, 42(2), Duval, Y. (2006). Cost and benefits of implementing trade facilitation measures under negotiations at the WTO: an exploratory survey. Asia- Pacific Research and Training Network on Trade, Working Paper Series 3. Retrieved from: Fujimitsu, M. (2013). Quantifying the effect that aid for trade facilitation has on customs clearance in Sub- Saharan Africa in terms of time and cost. World Customs Journal, 7(1), Retrieved from: 0Fujimitsu.pdf. Moïsé, E. (2013). The costs and challenges of implementing trade facilitation measures. OECD Trade Policy Papers, No Paris: OECD Publishing. Retrieved from: en OECD, (2015). Trade facilitation indicators country note - South Africa. Paris: OECD. Pearson, M. (2015). Costing of specific needs of Zambia s implementation of the trade facilitation agreement. United Kingdom: Foreign and Commonwealth Office. Portugal- Perez, A., & Wilson, J. S. (2009). Why trade facilitation matters to Africa. World Trade Review, 8(03), World Bank. (2017). Doing Business 2017: Measuring Regulatory Quality and Efficiency. Washington, DC: World Bank Group. World Bank. (2016). Connecting to Compete 2016 Trade Logistics in the Global Economy. Washington, DC: The World Bank. OECD. (2015). Trade Facilitation Indicators Country note - South Africa. Paris: OECD. World Economic Forum. (2016). The Global Competitiveness Report Geneva: World Economic Forum. World Bank. (2016). Doing Business 2016: Measuring Regulatory Quality and Efficiency. Washington, DC: World Bank Group. WTO. (2016, 04 18). Trade Facilitation Agreement Facility. Retrieved from Notification & Ratification: World Bank. (2014). Connecting to Compete 2014 Trade Logistics in the Global Economy. Washington, DC: The World Bank. World Economic Forum. (2015). The Global Competitiveness Report Geneva: World Economic Forum. World Trade Organization, (2015). World trade report 2015: Speeding up trade: benefits and challenges of implementing the WTO Trade Facilitation Agreement. WTO Publications. Geneva Switzerland. United Nations, (2014). Conference on trade and development: world investment report United Nations Publication. Geneva Switzerland. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 49

60 Annex I: Key Informant Interview Respondents List # of KIIs Type of interview Name Title Organization Sub- category Private sector Representatives of firms involved in logistics and transportation 1. KII- individual Mr. Michael Neerstrand Helweg Country Manager Maersk Logistics 2. KII- group Ms. Claudeth Hung Ms. Assemane Aboobacar 3. KII- individual 4. KII- individual Managing Director Mozambique Operation officer SGS Rogers IDS (In charge of Cargo transportation for South African Airlines in Mozambique) Logistics Mr. Karel Meyer Country Manager LBH group Logistics and transportation Ms. Deanne de VP Sub- Saharan Agility Logistics Vries activities and Acting Country Manager Mozambique Mr. Donovan Terminal Manager - Grinrod Nacala Logistics Liedeman Nacala Mr. Gama Founder and CEO Gama Afonso Logistics Afonso Despachantes 5. KII- individual Background interview Private sector Representatives of firms involved in trade 6. KII- individual Mr. Francisco Santos CEO JFS Joao Francisco Santos Group Agriculture products 7. KII- Mr. Diogo Country Director Nestle / Parmalat Agro- industry individual Victoria 8. KII- individual Mr. Jatine Modi Founder and CEO ASIMOZIMPEX Agriculture products 9. KII- individual Ms. Tricia Wallace Country Director Matanushka Agriculture products 10. KII- individual Mr. Alberto J. Wate Commercial manager STEMA Agriculture products 11. KII- Carlos Moamba Co- founder of Technoserve Agro- industry Individual Technoserve Mozambique, presently consultant at Technoserve 12. KII- Individual Adolfo Correia Founder and CEO Tropigalia Imports of final products all industry Private Sector Association 13. KII- individual Mr. Kekobad Patel Board Chairman of the fiscal, customs and international CTA - Confederation of Business associations in Association of business associations ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 50

61 # of KIIs Type of interview Name Title Organization Sub- category trade policy committee Background Ms. Barbara Chief Executive interview Mommen Officer (CEO) Public sector Mozambique administration and government 14. KII- individual 15. KII- individual 16. KII- individual Mozambique. MCLI Maputo Corridor Initiative Mr. Osorio Lucas CEO MPDC Maputo Development Port Company 43 Mr. Nicolau L. Sululo Mr. Guilherme Mambo Background interview Academia / Policy experts / Bilateral agencies 17. KII- individual 18. KII- Individual Background interview Background interview Background interview Mr. Sergio Dista Mr. Al- Noor Rawjee Ms. Jane Kitson Mr. Peter E. Coughlin Sergio_Chitara Caroline Ennis Ashok Menon National Director Board Director Development Advisor at Department for International Development and support to Private sector Director Country Representative Executive Director and Individual Consultant Head of the Program Consultant Consultant Ministry of Industry and Commerce National Directorate in support to the development of the Private Sector (DASP) MCNet (Mozambique Community Network) 44 CFM National Railway Company Department for International Development (DFID) UK Aid ISCTEM - Instituto Superior de Ciências e Técnologia de Moçambique US Department of Commerce EconPolicy Research Group, Ltd. SPEED program team Associations of stakeholders Bilateral agency Academia Bilateral agency Policy expert Bilateral agency / Policy experts 43 MPDC is a public- private partnership between CFM, Dubai Port and Grinrod Mauritius. 44 MCNET is a public- private partnership created to implement the Mozambique Single Electronic Window for Customs. ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 51

62 Annex II: Online Survey Questionnaire Survey Trade Facilitation in Southern Africa: Mozambique Private Sector Priorities to Improve Trade Facilitation in Mozambique This online survey was developed as part of a larger study of the costs and benefits of different types of trade facilitation measures (TFMs). This study includes key informant interviews and online surveys being collected in seven countries: Botswana, Malawi, Mozambique, Namibia, South Africa, Zambia and Zimbabwe, and implemented by Tutwa Consulting Group on behalf of GIZ. TFMs are trade facilitation policies/ interventions that aim to simplify and harmonize the necessary steps for easing the flow of trade across national borders including import, export and transit procedures. We are gathering private sector perspectives on the challenges for trading across borders, and the benefits that certain types of trade facilitation policies or interventions would have for firms such as yours. This research may be used to inform government decision- making and priorities as well as development partners and SADC programmes. This survey will ask you to rate and rank selected TFMs that have not yet been implemented in your country which the assessment team has identified as potentially beneficial for the private sector, so we can learn about your priorities for improving trade facilitation. We appreciate it greatly if you could take the time to complete this short survey on your experiences trading or moving goods across borders. Your survey answers will be kept anonymous and no information that you provide will be publicly disclosed in a manner such that it is attributable to you. This survey should not take more than five to ten minutes to complete. If you have any questions about this survey, please contact Heinrich Krogman at Tutwa Consulting Group on heinrich.krogman@tutwaconsulting.com. Thank you for your time. There are 16 questions in this survey Tell us about yourself This section asks introductory questions to help us categories you, as a respondent. This relates to your ASSESSMENT OF SELECTED TRADE FACILITATION MEASURES IN SOUTHERN AFRICA 52