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TRUCK BAN PUSHES UP OPERATING COSTS
BY LOUIS WASSER
A Cairo Governorate decree restricting the movement of small trucks on city streets during daytime hours is helping to ease traffic congestion in the capital, but business owners argue it has disrupted the distribution of their products and could cost them dearly.
“The whole supply chain [will be affected] from big to small [businesses],” warns Omar El Derini, chairman of the Foreign Trade Policies, Transportation & Ports Committee at the Federation of Egyptian Industries (FEI) and an outspoken critic of the decree.
Decree 893/2008, issued on March 31, impacts the traffic rules for small trucks – those with cargo under two tons – within the city limits of Cairo governorate, excluding highways such as the Ring Road. These small trucks are now restricted from being on many of the governorate’s streets between 7am and 8pm. Guidelines banning most big trucks – those with cargo over two tons – within the city during daytime hours already exist, and are minimally affected by the new decree.
Fifi Mohamed, executive director of the Cairo Traffic Bureau, explains that Cairo governor Abdel Azim Wazir’s decision to issue the decree was driven by three main factors. “First, the traffic jams in Cairo,” she says. “Second, the pollution [problem] and third, that we didn’t have rules to manage [small-truck traffic].”
Few dispute the fact that Cairo traffic is a problem or that the government needs to address it. Spending hours in gridlock choking on fumes is a daily reality for Cairenes. The massive problems of congestion and unsafe conditions on the capital’s roads created the impetus for the governorate to take action, argues the logistics manager of one of Egypt’s largest fast-moving consumer goods (FMCGs) manufacturers, speaking on condition of anonymity. “The pressure on the government to take really aggressive measures is there.”
But banning small trucks is not the solution, say members of the business community, who argue that the decree will drive up the cost of doing business. After learning about the decree, the Federation of Egyptian Industries submitted a letter to the minister of trade and industry, Rachid Mohamed Rachid, detailing its negative impact on the private sector. They also requested a meeting with the Cairo governor – a meeting that never materialized. He did, however, meet with local chamber of commerce representatives. “The governor said he was going to look into how he could help in improving the implementation of the decree, but nothing has been done yet,” says El Derini.
While he does not expect the decision will be repealed, El Derini points out that an adjustment period to help businesses prepare for the new arrangement would have been useful. The government claims the decree was discussed in the press two weeks before it was issued on March 31, though many business owners claim they only became aware of it once it was enforced the following day. “We [the FEI] were not even given a period of time to [help] adjust companies to the new regulations,” he says.
And adjustment is necessary. Due to the long-standing ban on lorry traffic in city limits during daytime hours many businesses rely on small trucks to move their goods. “I was really surprised because this is the only way to move goods during the daytime,” says Ali Salem Heikal, director of the Traffic & Transportation Consulting Unit (TTCU) at Ain Shams University. Despite this, small-truck traffic accounts for only a small percentage of overall traffic, he stresses.
One of the activities of the TTCU is to conduct vehicle counts to analyze the traffic patterns on Cairo streets. “We have two types of truck traffic: small size pickups, which are [for cargo under] two tons, and lorries [for cargo over two tons]. Their impact is really not much in terms of traffic,” says Heikal. “Pickups represent around 5 percent [of traffic], and trucks are normally banned from the main roads [during the day].”
The percentage may be small, but there are other factors to consider in determining the impact of small trucks on Cairo traffic. Even though his company’s distributors – and through them his own company’s operations – depend on a fleet of small trucks to transport their goods, the logistics manager of the FMCG company was well aware of their impact on Cairo streets. “For sure they do [represent a problem,] not only because of their size, but because they don’t follow the right traffic rules,” he says. “Their deviation is causing issues, not the other way around. So [it was an issue of] getting them off the street versus making them abide by the law, and the only thing to make them abide by the law was to get them off the road. It’s an issue of discipline rather than an issue of size.”
City officials claim that getting these vehicles off the street is helping to reduce traffic jams. “I think it’s better than before,” states Mohamed. She argues that the decree has not only reduced traffic, but has also cut down on air pollution, citing a letter to this effect from the Ministry of State for Environmental Affairs.
Business owners won’t argue with that. Their objection is that decisionmakers failed to consider the negative impact of the new traffic regulations on their business operations. Not only does the decree mean a change in hours that trucks can be on the roads, but it also introduces new restrictions on loading and unloading. Trucks are now only permitted to load and unload goods at night. Taken together with the ban on daytime travel within city limits, this will force companies to shift the way they move their products. “Everything [will be] affected: manufacturers all the way down to retailers,” says El Derini.
Operating costs will be driven up by the need for employees to work at night and the necessity of renting new storage space to facilitate their new distribution operations. “[Companies are] going to be trying now to get warehouses in the middle of residential areas.” This will result in loading and unloading at night in areas where people are trying to sleep, he says.
The new decree will require companies to change their distribution routines, in many cases requiring them to find alternative, more circuitous routes to deliver their products to customers. “The impact is more on distributors who try to reach the small outlets,” says the logistics manager of the FMCG company. “But for us, because we deal mainly with distributors and with big outlets... the direct impact was not that big.”
This negative impact on distributors, he argues, is likely to flow down the supply chain. “It’s a chain reaction. When the distribution cost is high, the distributors will start trying to somehow reduce their cost or eliminate non-value added cost, and they will start by eliminating some of the small customers. This means that many of the small customers will have difficulty sustaining their business, and hence [earning] their daily and monthly incomes.”
The Metro Markets supermarket chain, which has 12 stores in Cairo Governorate, was able to adjust quickly to the new decree, explains Hamdy Zakaria, the company’s administration and government relations manager. Its transition was smoothed by the fact that the chain already had its warehouses outside the restricted area and conducted most, if not all, of its deliveries to its branches at night. “[However,] there was a negative side effect regarding the vans used for home delivery,” he says. Daytime restrictions in some areas such as Zamelek apply to these vans, which carry less than two tons of cargo. This has forced the chain to use taxis and hire private cars to do home delivery, adding extra costs.
Bigger companies have been able to adjust more easily to the effects of this decree than their smaller counterparts, argues El Derini, simply because they have the finances to buy new cars or rent storage facilities within the city in order to improve their distribution efficiency. But small and medium-sized businesses will simply need more time to get their house in order. “There’s no guarantee that everyone will be able to deliver or accept [products] at the additional cost involved,” says El Derini. “Some products would not really be capable of bearing the extra cost.”
The elimination of delivery to small retailers by suppliers could force some businesses at the lower end of the supply chain to close down. “Small players in the market will start disappearing because the cost will be high and distributors will start cutting them off,” argues the logistics manager. “They will either have to get their own products from wholesalers, or they will have to shrink their business.”
For most affected businesses, the real challenge of the new restrictions on truck traffic is the timing. “Unluckily, this decree came first, and then there were more food price increases, and then we got the gas increase,” says El Derini. “Everything is adding up at the same time. People are just recalculating and recalculating the cost of products in the last six weeks weekly, because they’ve been hit by several increased costs.”
Not only does the decree affect current business operations, it might affect whether Egypt realizes its potential for business growth in the future, El Derini says. “A decree like this can affect growth, which means less creation of jobs, because as a manufacturer I’ll think twice about whether I can increase my production or add a production line with the way my distribution is.”
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THE DECREE’S SPECIFICS
Decree 893/2008, issued March 31, aims at alleviating traffic congestion in the capital by limiting truck traffic during daytime hours on the streets of Cairo Governorate.
• Article 1 bans all trucks, regardless of size and load, from all bridges within the city limits of Cairo Governorate, limiting their access to only five bridges between 12am and 6am: Semat, Rod Al Farag, Amiriya, Monib and Marazik bridges
• Article 2 forbids the movement of smaller trucks – those that carry cargo under two tons – between the hours of 7am and 8pm from much of the city, including Downtown, Heliopolis and Zamalek. Moreover, these trucks can no longer access Sixth of October Bridge during the day, as well as all major tunnels and roads, including Al Azhar and Salah Salem roads
• Article 3 limits loading and unloading activities to between 8pm and 7am
• Article 4 states that trucks otherwise restricted from areas between 8pm and 7am that are transporting fuel, food or performing a service deemed necessary for the public good can obtain permits from the Cairo Governorate Traffic Authority to access these areas
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