US$ 13.6 Million ADF Grant to Facilitate Trade and Transport in East Africa

29/11/2006
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Tunis, 29 November 2006 – The Board of Directors of the African Development Fund (ADF), the concessional window of the African Development Bank (AfDB) Group has approved a grant of 9.20 million Units of Account (UA*), equivalent to US$ 13.6 million to finance an institutional support project to facilitate trade and transport in  East Africa.

The project aims at improving the trade environment through the effective implementation of the East African Customs Union Protocol and enhancing the efficiency of transport and logistics services along key corridors by reducing non tariff barriers and uncertainty of transit time.

Envisaged project outcomes:

  • Establishment, harmonization and enforcement of legal and regulatory customs framework to consolidate an effective Customs Union and free trade area by the end of the project;
  • Establishment and strengthening of appropriate Corridor management institutions on the Northern and Central Corridors and provision of adequate transit transport facilitation;
  • Significant reduction of total transit time through the two main transport corridors;
  • Improvement of the predictability of total transit and travel time along the region’s main Corridors.

The project involves a land area of 1.82 million square kilometers with a population of 115 million excluding the DRC. The size of the economy of the five countries is US$43.5 billion. The Gross National Income per capita average is US$323, with the lowest in Burundi at US$90 and the highest in Kenya at US$480. The region is endowed with some of the most fertile lands in Africa with the percentage of agricultural land to total land area varying from 45% to 85%. Diversification of production and markets is increasing, but these countries are still highly dependent on a few agricultural commodities, especially coffee and tea.

The region is also one of the most frequented tourist destinations in Africa. Tourism is the number one industry in both Kenya and Tanzania. Despite all its natural endowment and other potentials, the incidence of poverty in the region is still very high with the percentage of people living below the poverty line as follows: Kenya (52%), Tanzania (57.8%), Uganda (38%), Rwanda (51.7%) and Burundi (54.6%). The poor in the region, most of whom are subsistence farmers in rural areas, are disconnected from markets by extremely high transport costs and by severe constraints on their ability to graduate from subsistence farming. For instance, transport costs from the farm-gate in Rwanda to the port of Mombasa are about 80% of the producer price. The potential benefit from improved trade and transport facilitation in enabling trade in value-added exports is high. There is equally a substantial potential in poverty reduction from initiatives that reduce trade and transport costs and facilitate movement out of subsistence into commercial activities. Project beneficiaries include poor households and the general public, transport/logistics operators, transport users, and government agencies.

The estimated total cost of the project irrespective of the financing source is UA 195.50 million (USD 280.06 million) not including the Partial Risk Guarantee. The cost of the regional components of the project is estimated at UA 9.85 million (US$14.19 million), of which UA 8.20 million (US$11.77 million) is in foreign exchange and UA 1.68 million (US$2.42million) is in local cost. The proposed project will be co-financed by the World Bank, the ADF, Kenya, Tanzania, Uganda, and Rwanda. The EAC Secretariat and the Corridor Authorities will also contribute a small portion in financing their respective components.

Project Brief

  • Title of Study: Institutional Support for East Africa Trade &Transport Facilitation Project
  • Countries: Kenya, Rwanda, Tanzania, Uganda, Burundi
  • Executing Agency:
    • East African Community - P.O. Box 1096 Arusha, Tanzania - Tel: +255 27 2504253 - Fax: +255 27 2504255 - Email: eac@eachq.org
    • NCTTCA Secretariat - P.O. Box 95341 Mombasa, Kenya - Tel: +254 41 314643 - Fax: - +254 41 311572 - Email: ttca@africaonline.co.ke
    • Ministry of Infrastructure Development - P.O. Box 9144 Dar es Salaam, Tanzania - Tel: (255) 22 2112858 - Fax: (255) 22 2112751
  • Estimated Starting Date: January 2007
  • Duration: 48 months
  • Total Cost: UA 195.50 million
    • ADF Grant: UA 9.20 million
    • World Bank (IDA): UA 138.11 million
    • Kenya, Rwanda, Tanzania, Uganda: UA 46.39 million
    • EAC, NCTTFA, TTFA: UA 0.95 million

* 1 UA = 1.48004 US$ as at 29/11/2006