This is how Tanzania can uplift its air cargo business

Dar es Salaam. When people think of air travel they picture planes full of passengers.

But air cargo, which accounts for only one per cent of exports by volume globally, is as vital—perhaps more—to the global economy.

However, less attention is being paid to cargo business and things are worse for perishable products- those likely to spoil, decay or become unsafe to consume if not refrigerated. They include horticultural products, meat, fish and dairy products.

Why poor cargo business trend?

Transporting perishable goods has never been smooth due to five challenges such as unsupportive airport infrastructure and high transportation costs due to lack of control on freight charges.

Others are a few number of direct flights to outside the world, lack of cargo facilities for handling perishable products at airports excluding Julius Nyerere International Airport (JNIA) and insufficient fund among exporters.

That is why some exporters prefer using Jomo Kenyatta International Airport (JKIA) in Kenya.

Traditionally, about 80 per cent of horticultural products were being airlifted to international markets via JKIA.

Way forward

If the country is to succeed in the exports of perishables, it should create a better business operating environment.

To achieve that, stakeholders have suggested five issues to promote the performance of exportation of perishable goods through the country’s airports.

They include improvement of infrastructure, the strengthening and improvement of the services of all airports, and the establishment of stronger input finance arrangements and make the farmer organisations bankable.

Others are consistent and strong policies, provision of expertise to players in the sector and cooperation among key players along the market value chain.

Infrastructure

Improving infrastructure is vital for Tanzania’s economic prosperity and sustainable development of air cargo.

According to the Tanzania Civil Aviation Authority (TCAA), 40 per cent of fruits and vegetables harvested go bad each year before they are transported.

The regulator sees a need to improve services in JNIA, Kilimanjaro International Airport (Kia) as well as Arusha, Mwanza and Songwe airports to attract exporters of perishable goods.

TCAA business analysis and forecasting chief Rodney Chubwa said the government and private sectors were needed to ensure the necessary export facilities at all airports, such as the cooling and preservation facilities as well as the aircraft are available.

He was speaking recently during a stakeholders’ consultative meeting.

Cargo facilities

According to Tanzania Airports Authority (TAA), airports that have cargo facilities for handling perishables are JNIA and Kia.

Four ground handlers — Swissport, Nas-Dar Airco, Africa Flight Services and a German Logistics Company, part of the DHL Group — operate at JNIA. At Kia only Swissport and Nas Dar Airco operate.

A report suggests that if Tanzania is to improve cargo business, the government should ensure the provision of expertise to its people.

That can be done through identification of joint ventures between Tanzanians and foreign business partners and at the same time an increasing number of Tanzanian managers can gain experience and technical knowhow on horticultural production.

Direct airfreight

Tanzania Horticultural Association (Taha) general manager Aman Temu said transportation of high value fresh horticulture produce requires efficient and reliable direct airfreights to the destination markets.

This has proven successful in Kenya and Ethiopia, whose impressive performance in horticulture exports is attributed by, among other factors, the reliable and efficient of airfreights direct to markets destination.

“These countries have dedicated cargo airfreights which transport horticulture produce direct to the markets destinations,” said Mr Temu.

“They have made available cargo handling facilities with cold storage to accommodate all types of perishable products such as meats, fruits, flowers, fresh herbs and vegetables.”

Cargo aircraft

His sentiment was echoed by the chief executive officer of the Iringa-based GBRI business solutions- which deals in agribusiness, Ms Hadija Jabir, who called on the government to invest in cargo planes to facilitate the airlifting of products to domestic and foreign markets.

“Like our neighbouring Kenyan growers, who have competitive advantage in foreign markets, it is high time we got direct flights to the markets, for us to spend less money in ferrying products,” noted Ms Jabir.

“Our horticulture produce fails to reach European, Asian and American markets due to unfriendly infrastructure.” She was seconded by aviation expert Juma Fimbo, who called on airlines to change the way they do business from passenger-driven to cargo-driven perspective.

This can be achieved by undertaking marketing of the country’s airports to attract more players who can invest in cargo aircraft.

“Let us give cargo the status it deserves,” stressed Mr Fimbo.

Nas Dar Airco operations manager Hassan Ngozi spoke about adequate cold chain and logistics investments to ensure the produce reaches regional and global markets in an efficient manner.

Aviation consultant Jimray Nangawe proposed for the establishment of stronger arrangements input finance and make the farmer organizations bankable. “Making farmers bankable should be priority, if we are to take cargo business to the apex,” opined Mr Nangawe.

He said policy inconsistencies were impeding businesses.

He suggested that policies be clear and stable for operators to know their business future.

“Processes and procedures are a bit confusing. It is as if they are copied somewhere else and pasted in our country,” he lamented.

TCAA director general Hamza Johari said to ensure smooth functioning of national policies, there is an urgent need to put in place an effective resource mobilisation strategy and institute a proper and strategic resource allocation and utilisation in implementing relevant policies.

“The institutional framework for horticulture sub-sector in the country is also fragmented and un-coordinated and practically weak to support the sector,” said Mr Johari.

According to stakeholders, the role of the local government towards supporting horticulture has been put into serious doubts after receiving numerous complaints from farmers towards their operations and attitudes.

The government, stakeholders say, should emulate institutional coordination models of other countries like Kenya and Ethiopia whose horticulture sub-sector performs well.

On regulations, players in the industry want authorities to have a relook at licensing of ground handling firms.

Aviation consultant Gaudence Temu was recently quoted by The Citizen as opposing TCAA’s licensing of airline operators to also undertake ground handling activities.

“With the small size of the market, featured with the struggling airline operators, slim are the chances to attract investment into the sub-sector,” warned Mr Temu, formerly Swissport Tanzania chief executive officer.

To attract more air cargo, Mr Temu suggests the government to be flexible in treating air cargo business.

As things stand, all cargo operators experience a lack of flexibility in market access rights under bilateral agreements in which air cargo is treated as part of passenger services.

In that regard, all the limitations usually imposed on passenger services in respect of, among others, routes, traffic rights and frequency, may also apply to cargo business.

TCAA economic regulation acting director Daniel Malanga was quoted by The Citizen last October during the first national aviation forum held in Dar es Salaam as saying to widen the air cargo’s market size, various countries had been adopting more flexible regulatory framework approaches.

The International Civil Aviation Organisation (ICAO) has developed guidance, in the form of model clauses for air transport agreements, for optional use by states in liberalising air cargo services.

It is on that basis that, he said, Tanzania has been able to liberalise most of its Bilateral Air Services Agreements (Basas) with other countries, to attract cargo carriage.

“Plans are afoot to walk the talks on the Yamoussoukro Decision on liberalisation of Air Transport in Africa by consideration of signing a solemn commitment of the single African aviation market,” Mr Malanga said, putting clear that, caution would be taken to protect local players.

High charges

Emirates representative Benny Ngozi opined that airport charges be competitive enough to win the users of the airports.

Economically, a couple of fees and levy increase cost of production.

“The tariffs charged here are greater than Kenya’s; and for exporters, the process is not as smooth as that of Kenya. In that regard, we need to rethink on the matter,” reads the report in part.

Mr Ngozi cites that transportation costs from Tanzania to Europe range from $1.40 to 1.70 per kg, higher than Kenya’s $1.20 and 1.40.

According to JNIA veterinary research officer Mora Samira, the cost of transporting goods from Tanzania to the United Arab Emirates (UAE) stands at $1.5 per kg, unlike in Kenya, which is between $0.4 and 0.5.

Operators’ defence

Airlines said high costs were due to high operations costs attributed to numerous charges, leaving them with no option than transferring the burden to their customers.

Such charges, according to them, are those for landing, parking, passenger services, departure and navigation.

Others are insurance and an 18 per cent VAT on leasing of aircraft and spare parts, fuel and experts training.

The landing charge per 1,000 kg at Dar es Salaam, Kilimanjaro, Zanzibar and Pemba airports stand at $5 (about Sh11, 300 at the prevailing exchange rate), according to Tanzania Airports Authority (TAA).

Parking charges for aircraft of up to 20,000 kg stand at Sh1, 000 per 12 hours and $5 (about Sh11,300) for locally registered airlines and foreign ones respectively.

The charge for for aircraft ranging from 20,000kg and 60,000kg is Sh1,000 for six hours and $5 (about Sh11, 300) for local and foreign airlines respectively.

Swissport chief executive officer Mrisho Yassin sees a need for incentivising what is exported through air.

“The lack of non-cash incentives to promote perishable Industry, is a huge challenge,” said Mr Ngozi, adding that it culminates to non-conformance of international quality standard on facilities and products, and eventually multiple bans and embargo. Recently, Dodoma-based slaughterhouse was closed down, making Emirates airline, which was carrying 70 tonnes to UAE per week to lose its business to Kenya.

“We have lost business to neighbouring Kenya. Surprisingly, Kenyans use cattle from Tanzania and process them in a more advanced way, ready for export. It is high time the government intervened to rescue exporters and our business,” noted Mr Ngozi.

TAA efforts to cut costs

TAA acting director general Richard Mayongela was recently quoted by The Citizen as saying plans were on the cards to reduce the costs of air transport by widening the scope of its non-aeronautical sources of revenue—the ones that do not affect air operators, among others, rent and concession.

It is committed towards increasing the proportion of non-aeronautical revenue to 41.5 per cent of Sh119.62 billion revenue set to be collected in 2017/18 , and 60 per cent in the coming three or four years.

In 2016/17 financial year, TAA’s data show that it earned a total revenue of Sh59.3 billion, of which non-aeronautical charges accounted for only 31.5 per cent and the rest was aeronautical.

Rent and Concession is currently the main non-aeronautic contributor according to the 2016/17 TAA’s data, accounting for approximately 80 per cent followed by airport parking fees by 11.8 per cent.

To enhance diversification of non-aeronautical channels of revenue, Mr Mayongela calls for private sector to join with TAA to invest in various projects in the form of public-private partnership.

The projects include, a Sh15 billion four star hotel and a special economic zone at JNIA, as well as the convention centres and a hotel in the Arusha and Mwanza airports.

Other projects on the card are the construction of a $200 million (about Sh452 billion at the current exchange rate) airport at Msalato in Dodoma City, a $1 billion (about Sh2.2 trillion) airport for Bagamoyo, in the Coast Region, as well as three -star hotels at Songwe and Mtwara.

Meanwhile, TAA senior commercial and marketing officer Rose Komino said firms from the private sector must show interest to support and work with horticulture producing smallholder farmers.

TAA offers areas for investment on cargo facilities in the designated cargo villages within its airports.

This is in line with the authority’s strategies to support major investment opportunities in tourism, agriculture, fishing, mining; agro-processing, horticulture, industrialization, just to mention but a few.

“We invite investors to come and invest in cargo terminals construction and value addition in raw materials,” noted Ms Komino.

She said, value addition options should be emphasized to generate more employment opportunities and add value to the raw products.