Harmonised courier services to reduce cost of movement of goods

Saturday March 7 2015

A Postal Corporation of Kenya employee wheels

A Postal Corporation of Kenya employee wheels mail to a standby lorry for distribution. EAC member states are seeking to harmonise courier and postal service operations. PHOTO | FILE 


East African Community member states are seeking to harmonise courier and postal service operations in order to ease the movement of parcels and cargo around the region. 

Among the areas targeted for harmonisation are electronic transactions and licensing, and regulations for regional postal and courier operations.

The strategy will include an assessment of the status of the postal sector in partner states, policies, laws and regulations for the sector, establishment of effective, efficient, and sustainable postal markets and the development of a modern postal infrastructure.

A survey commissioned by the EAC to guide in the development of the strategy is complete.

“The baseline survey for the EAC postal sector has been concluded, and a meeting to consider the report of the survey is scheduled for May,” said Philip Wambugu, the EAC Secretariat director of infrastructure.

The committee spearheading the development of the strategy comprises postmasters-general, regulators, technical ministries and the East African Communications Organisation (EACO). The committee was established in 2013 to advise the EAC Council of Ministers on postal development in the region.

“We will involve the private sector to see how well we can develop the strategy,” added Mr Wambugu.

A courier service provider, for example, will only require one licence to operate across the region once the harmonised regulations are in place. The current requirement is to register in each of the member states for the domestic, regional and international categories. Charges vary in each country depending on duration and category.

In Kenya, the initial licence fee for domestic postal and courier operations is Ksh30,000 ($329) for one year. Tanzania charges Tsh3 million ($1,612) for three years. In Uganda, the charges are $1,000 for one year. In Rwanda, there are no fees charged. However, the Rwanda Utilities Regulatory Authority has proposed to start in April with annual fees of $3,500 for a domestic licence.

For courier companies registered in Tanzania, a regional licence costs Tsh5 million ($2,688) for three years. Kenya charges Ksh50,000 ($549) for a regional licence for one year; Uganda charges $5,000 for the same period, and Rwanda has proposed an initial fee of $2,500. International couriers pay Tsh15 million ($8,064) for an initial fee for four years in Tanzania, Kenya charges Ksh200,000 ($2,197) for one year, and Uganda $5,000 per year. Rwanda has proposed $10,000 a year.

“Regional licensing could expand the numbers of quality service providers. The high fees being charged by private couriers may be related to the issues of insecurity and the high insurance premiums for carriage of parcels among other things,” said Mr Wambugu.

Experts said harmonisation of the sector will attract new investments as the cost of doing business will come down.

“If a courier service provider is registered in Uganda, they have a right to operate in Kenya, Rwanda, Tanzania and Burundi using the domestic licence. Member states will come up with a way of sharing the revenue,” said Andrew Luzze, the executive director of the East African Business Council.

“Harmonisation of the licensing fees will be automatic, as any country charging higher than the others will lose out to its competitors,” he added.

The Communications Authority of Kenya has proposed to increase the annual fee on international courier service providers to 0.4 per cent of the annual revenue of the courier company, from Ksh200,000 ($2,197) a year. Investors said the fees are driving up the cost of doing business.

“Harmonisation will be a good thing if it also addresses the different fees countries charge on top of the licence fees,” said Alan Cassels, DHL Express country manager for Kenya. DHL moves 400,000 deliveries every year in Kenya, with Nairobi serving as the regional hub for the East African region.

The courier service providers are also seeking a duty-free import allowance for small items. It costs $50 in Kenya to for an online purchase regardless of the item’s cost. 

The courier service providers pay an import duty of 19 per cent of the goods, VAT of 16 per cent, a fee of Ksh5,000 ($55) to Kenya Airports Authority, Ksh250 ($3) to the Kenya Bureau of Standards and 1.5 per cent for the railway development levy.

“Governments should stop using courier services as a way of revenue collection, and instead promote trade and growth across the member states,” said Mr Luzze.

Experts said the harmonisation could lead to simplified importing procedures, as well as enhancing online shopping and cracking down on unregistered service providers. Reports indicate complicated processes hinder registration of many service providers.

“Unlicensed operators may be more willing to become licensed if governments simplify the process, reduce reporting obligations, and lower the fees,” said Ian Streule, a partner at Analysys Mason Ltd, a global research firm hired by the Communications Authority of Kenya to audit the courier business. 

Mobile phone and Internet use have led to faster communication, and postal services are lagging behind.

“The region lacks the infrastructure to match increased competition from fast message delivery avenues that pose a huge challenge for the public postal sector. There has been a decline in mail volumes resulting from changing customer behaviour and needs,” said Hodge Semakula, EACO’s executive secretary.

The postal and courier sector in Kenya has licensed 214 operators, with 1,330 outlets and a penetration of 15,730 people per courier outlet, down from 29,600 a year ago. In Uganda, annual ordinary letter traffic fell to 881,000 in 2013/2014, from 997,000 the previous year. Domestic registered letter post increased from 14,000 to 17,000, while EMS fell from 197,000 to 181,000 over the same period, data from the Uganda Communications Commission shows.

The number of letters sent locally in Kenya rose by 17.9 per cent to reach 13.9 million in the three months to September 2014, up from 11.8 million letters sent during the previous quarter.

According to TradeMark East Africa, harmonisation of courier services means more opportunities.

“Adopting technology in courier services and ICT collaboration presents opportunities for improving existing products and services,” said Nelson Karanja, TMEA senior communications manager.