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Sunday, September 25, 2022

Is GRA’s insatiable appetite of increasing import duty weakening GPA’s feeble comparative advantage?

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By Jawara

The Gambia Revenue Authority (GRA) has increased Import Duty and Processing Fees for domestic and transit cargoes at the Port of Banjul in August 2022 without any public notice. For example, personal effects (40ft container) with no vehicle in the container is increased from GMD80,000 to GMD125,000 (56% rise). Personal effects on average in the last five years accounts for over 60% of total container traffic TEUs (twenty-foot equivalent unit) handled at the Port of Banjul.

Over the years the Port of Banjul was renowned for its relatively low shore handling charges and easy customs clearing processes and payments, thus occasioned and strengthened its competitive advantage. This comparative advantage made Banjul a go-to-centre for transit and re-export trade for businesses in neighbouring countries such as Senegal especially its southern region of Casamance, Guinea Bissau, Guinea and Mali, a landlocked country with a population of over 20 million. It is also worth mentioning that the Port of Banjul’s proximity to these transit/re-export destinations endears Banjul to businesses and their agents from the region.

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The table below indicates the proximity of the Port of Banjul to various transit destinations compared to Dakar Port.

The competitive edge of Banjul Port has weakened over the years due to underinvestment in port infrastructure and the continuous increase in import duty and processing fees. The Port of Banjul infrastructure (berths and yards) have reached a point of diminishing return as indicated by fluctuations of the port throughput in recent times. Congestion at the port also continuous to cause disruption in the country’s supply chain.

However, in recent years, the primary threat to the Port of Banjul’s comparative advantage is the continuous increase in import duty and processing fee for domestic and transit cargoes respectively.

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Import duty is normally a percentage charged on the total cost of imports (cost, insurance and freight) or based on a common tariff by members of a bloc like the Ecowas common External Tariff (CET) which is based on a set of rules “generally applicable to tariff and other common policy measures in relation to a set of rules and procedures enacted by the community or authorities of Member States and trade in goods traded between the Ecowas Community and third parties as well as among Member States”.

What is the reason for the recent increment in import duty and procession fees?

Has the CIF for seaborne cargoes from Las Palmas/Algeciras to Banjul increased by 56% from July to August 2022? Or has the Ecowas CET tariff increased by 56% from July to August warranting the recent increment in import duty? Or is Asycuda World the reason?

The tables below indicate the increase in import duty and processing fees.

Note: The above import duty is applicable to personal effect items in containers

only. Import duty for reconditioned vehicles from containers is shown below.

From the above table (table 4), it is apparent that processing fees paid to GRA for transit cargoes handled at the Port of Banjul has increased substantially from 2016 to 2020. According to Collins Dictionary “processing fee is a sum or amount paid to facilitate or process a transaction”.

Ironically, the GRA’s processing fee is far more than the shore handling charges of the GPA which is GMD750 and GMD1,500 for 20ft and 40ft containers respectively.

Remember GPA incurs direct cost in handling these containers which includes machinery, fuel, maintenance, labour and space.

 In addition to the processing fee, GMD500 to GMD1,000 is paid as an escort fee to a customs officer to escort the transit truck to a particular border exit point (Giboro, Amdalai, Farafenni or Basse).

With all these at play, is GRA not compelling local businesses and transit operators to look for alternative ways to cut on their costs?

Do you know GRA charges GMD7,500 to GMD8,100 as processing fees for rice (GMD15 per bag) for 20ft container whereas the Port charges GMD750 as shore handling?

There are many variables that businesses/consignees consider when deciding the port of destination for their cargoes. These could include freight, transit time, port efficiency and other charges like import duty and processing fees.

Comparatively, transit time for seaborne cargoes to Banjul is higher compared to Dakar even where the port of origin is the same. This could be attributed to cargo volume and consolidation time, carrier type (mother/feeder vessel), and most importantly port efficiency as the famous port adage has it “vessels make money when at sea and incur cost when in port”.

Apparently, GRA is contributing to weakening the GPA’s comparative advantage with their insatiable appetite for increased import duty and processing fees.

In a recent radio interview, the GRA conceded it is struggling to meeting its target of D13.5 billion for the year 2022. It was revealed on the same programme that from January to mid-August 2022, the GRA has assessed and collected a little over GMD7 billion.

Is GRA’s recent decision to increase import duty on seaborne cargoes induced by the fact that it has almost GMD6 billion to collect in three months to meet its set target? Certainly, this is the perception of many. What GRA is doing is wrong to say the least and should reconsider its decisions on surged import levies and processing fees.

There are serious questions we as a people should ask for answers. I know for a fact many people long for a platform to ask questions such as:

I.          What does the GRA Act 2004 say on the process of increasing import duty?

II.         Can the GRA increase its import duty without the approval of the National Assembly hence it is the same National Assembly that enacted the GRA Act 2004?

III.        Can the GRA increase its import duty without consulting relevant stakeholders like the GPA and GCCI?

IV.        Can GRA increase its import duty as and when deemed necessary?

V.         Does GRA factor the adverse effects this increment in duty could have on the general populace and GPA’s comparative advantage?

Talking of the adverse effects of these continuous increment in import duty and processing fee, let us enumerate some.

I.          Businesses in the Gambia are compelled to transit their cargoes through Dakar Port.

II.         Transit and re-export trade is increasingly relocating to Senegal.

III.        Indirect employment at the Ports of Banjul, be it clearing agents or labourers is on the downturn by the day.

IV.        The number of daily transactions at the GPA Rating Unit used to average 85 per day prior to the recent increment in duty and processing fee but now stands at 59 on average per day.

V.         The number of daily deliveries (containers exiting the port) was 79 per day on average but is now 63 Per day on average.

VI.        Over a thousand containers are in the stacks at the port terminals whose owners cannot afford to pay import duty especially personal effects and thus could lead to serious port congestion in the coming weeks or months.

VII.       GRA is sucking the life out of businesses whose goods are imported via the Port of Banjul.

VIII.      Personal effects businesses are a source of income and employment for many families and youths but with the recent increment in import duty many families’ income will be seriously constraint and overtime many youths engage in these businesses will be unemployed.

If you think GPA’s spatial capacity in terms of berths and yards is the sole reason businesses are transiting their cargoes from Dakar to Banjul, you truly need a thorough introspection. The comparative advantage of the port is being weakened not only due to its challenges in spatial capacity but also GRA’s excess appetite for increased import duty and processing fee year in year out.

Who regulates GRA? Clearly, it can’t be the Ministry of Finance which in consultation set the overzealous GMD13.5 billion target for the year 2022.

GPA is a strategic asset for this country and its strategic location should be fully utilised or else it will turn out to be a periphery in the supply chain network of the Ecowas bloc.

Hold your horses GRA or you will render the Port of Banjul too expensive to do business. 

Disclaimer by the author: The views expressed in this article are those of the Author and do not necessarily reflect those of the Gambia Ports Authority, Shipping Agencies or Clearing Agents.

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