East Africa gets $16m fund for transport

DAR ES SALAAM, TANZANIA – The second round of Challenge Fund support for innovators and entrepreneurs working in the logistics and transport sector was officially announced last week in Dar es Salaam. 

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The Logistics Innovation for Trade (LIFT) Challenge Fund is a $16 million (Tsh.35.2 billion) grant-based financial mechanism that supports innovators with good ideas for products or services that can reduce the costs of transport and logistics in East Africa.

According to TradeMark East Africa (TMEA) which is a not-for-profit organisation funded by a range of development agencies with the aim of growing prosperity in East Africa through trade, LIFT will provide grants ranging from $ 150,000 to $ 1,000,000 (Tsh.330 million to Tsh.2.2billion respectively) to winning proposals from innovators from across the world whose project ideas will be implemented in the East African Community (EAC).

It was further revealed that the launch follows a successful inaugural round that saw 9 awards to projects that are touted deliver a significant reduction in time and transport costs in their area of operations

LIFT is a TMEA initiative managed by Nathan Associates through a Fund Management Team based in Nairobi with funding support from the UK Government’s Department for International Development (DFID). LIFT seeks to trigger and introduce innovative approaches to tackling freight and transport costs in the East Africa region.

East Africa is reported to have the highest freight and transport costs in the world; over 50% higher than the USA and Europe per kilometre. Indeed, transport costs for landlocked countries in the region can be as high as 75% of the value of exports.

Transit times have the most significant effect on exports and also result in firms having to carry higher levels of stocks making them less efficient.

Successful LIFT projects will contribute to TMEA’s objective of reducing transport time along the main East Africa transport corridors by 15% by the end of 2016.

Speaking at a side interview session after the launch, Dr. Josephat Kweka, Country Director Tanzania, TMEA said that it was their hope that the entrepreneurs and innovators of the EAC in partnership with their counterparts internationally will drive forward development through the adoption or introduction of ‘best practice’ technologies in the transport and logistics sector, enabling local businesses to compete favorably in the increasingly global economy.

“LIFT is a valuable financial instrument that supports private sector ‘can-do’ to develop and test new ideas that should reduce the cost and time of transport and logistics in the EAC and TMEA is essentially co-investing with the private sector in projects that are seen as being too risky to undertake without external sponsorship or support,” Dr. Kweka said.

LIFT Challenge Fund Manager Mr. David Mitchell emphasized the impact of the challenge fund to local entrepreneurs saying that the Challenge Fund instruments fill a significant gap in the financial support needs of private businesses and the innovators that drive business activity to greater results and efficiencies.

“This is achieved while mitigating the risks of high-return projects that mainstream banking and financial institutions tend to avoid supporting due to the uncertainties of the business proposition or a bank’s own lack of experience in the sector,” Mitchell said.

The LIFT Challenge Fund is open to businesses and individuals throughout the world that are either presently operating or intend to be based in the EAC. Businesses in the transport and logistics sector, or those that provide services to actors within it, are now being invited to submit their innovative concepts to LIFT for possible funding.

Recognising the initial promise and success of Round 1 LIFT Award winners, David added, “We have 9 Round 1 projects that confidently predict they will deliver a significant reduction in time and transport costs in their area of operations, but with a wider extrapolation of the best practices proven, it is entirely logical that trade levels and the competitiveness of regional enterprises will be enhanced”.

He said a reduction of a single day in transit times between Dar es Salaam and Kigali for example should offer a potential for a 7% increase in export volumes, thus reductions in transit costs and times will present real potential for a resulting increase in trade attached to the wider benefits of a reduction in the cost of living and a more rapid growth in the creation of new jobs across the EAC.

TMEA works closely with EAC institutions, national governments, the private sector and civil society organisations. TMEA is funded by a range of investors in development that include: Belgium, Denmark, Finland, Netherlands, Sweden and the United Kingdom.

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Source: busiweek

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