By Meshack Kipturgo
A recent tweet from the Federation of Kenya Employers (FKE) Chairman stated ‘Now Uganda and Tanzania are exporting more food to Kenya than any other point in history…’ attracted varied reactions from Twittersphere and opened up the debate on regional trade.
The Chair argued that Kenya was becoming sloppy in agriculture, education and health and that there’s need for sober reflection on this trend. This commentary compelled me to reflect more critically on the role of the logistics industry in improving economic development of Kenya and the African continent in general.
Firstly, I can confidently state that Africa does not really need to rely on western countries’ support to develop its ability to trade and do business with itself. The continent only requires an inward and outward strategy to enable it cement its place in the global logistic economy through foreign investment and improved trading ties while internally driving regional trade through cross border integration.
The logistics sector across various countries in Africa reveals that substandard infrastructure continues to negatively impact the free flow of goods and largely influences the high cost of goods as well as inflate the cost of doing business in the industry. Today, cargo movement across Africa by road is painfully slow due to poor road networks and the multiple tariff barriers which make it extremely expensive to trade even within regional trade blocs.
In addition, the movement of cargo across Africa has been riddled with corruption and poor management of respective customs bodies further curtailing logistics operations.Though transport by sea in Africa accounts for 90 per cent of trade, more than any other region, poor infrastructure, challenges associated with piracy has continued to stifled smooth operations and come with additional security costs which are passed on to the consumer.
As a result of these challenges, intra-Africa trade still remains a challenge and Africa is operating below its potential with volumes of 12 per cent of all trade in the continent. However, the income generated from the logistics sector through customs department, is currently estimated at 40 percent of government revenues and points to the huge income potential that remains largely untapped.
Kenya recently commissioned the Standard Gauge Railway (SGR) ferrying cargo from the Port of Mombasa inland and beyond with the expectation of efficient cargo movement, reduced revenue leakages and cost savings for the consumer. It is envisioned that the SGR will extend to the regional neighbours of Rwanda, Tanzania, Uganda and South Sudan to enable efficient interconnection of transit cargo and boost economic development. On the air transportation front, the launch of the Single African Air Transport Market (SAATM) by the African Union in January 2018, is a silver lining with great opportunities for the logistics industry as it is bound to encourage pan-African integration by opening up the continent’s skies which could be a huge gain in reducing the cost of air cargo.
To reap full benefits of these interventions, Africa therefore needs to – as a matter of priority – enhance its transport infrastructure, remove all the bottlenecks associated with intra-trade by opening up their borders for cargo movement using a single rail network and single transport documents to facilitate the growth of key sectors of the region’s economies.
Borrowing a leaf from the West, the European Union’s growth, has been primarily driven through an EU decision to open up their borders for trade with each other. Trade in goods and services between EU Member States accounts for over two thirds of the overall trade of EU Member States.This same potential exists for African economies by adopting a logistics without borders philosophy. Dynamics in today’s global landscape mean emerging markets must start considering how to shape their own futures. Africa needs to take the cue from developed countries by shifting its focus and efforts to explore the trade potential within the continent.
Africa is the second-largest and second most populous continent on earth with an estimated population of over 1.2 billion people. It is home to 54 recognized sovereign states which presents a huge market for intra-Africa trade. However, these statistics may mean nothing if Africa doesn’t realize the need to take radical and more tangible steps that will enable it secure its own share of global economic growth while sustaining its own regional growth.
To achieve this goal, Africa needs to exploit its potential by working together on its shared future by encouraging a robust continental integration and trade reforms that are geared towards economic development and ease cross border trade. Trade barriers and fragmented markets will continue to put a lot of strain on the region’s growth hampering any possibilities of being an economic powerhouse on the global space.
In March 2018, 44 Africa member states signed the African Continental Free Trade Area (AfCFTA) at the African Union in Kigali, Rwanda. The agreement is a step towards African integration and is predicted to boost intra-African trade. The AfCTA is geared to reduce barriers to trade such as removing import duties and non – tariff barriers and boost intra-continental business. Jean-Louis Billon, VP of AfroChampions, a private sector group backing the initiative, told CNN: “There (are) too many barriers within the African continent and the only way for us to get to real development in the future is to boost trade and industry relations.”
In 2015, intra-African trade was worth just US$170m, according to the World Bank statistics which is way below its potential that runs into trillions of dollars. We need to be asking ourselves tough questions on what are the impediments to a self sustaining region? Collectively to succeed, individual governments must address these painful multiple tariff barriers in the various economic blocs so that sustainable and inclusive growth for the continent can be achieved. These regional trading blocs cannot work in segregation; they need to be scalable so as to improve connectivity across the African continent. Africa Union, consider this a tip to push Africa to the next frontier. Future generations will thank you for it.
The writer is the Group Managing Director at Siginon Group.
The Kenya Standard Gauge Railway (SGR) launched in 2017 has introduced an additional efficient cargo movement option from the Port of Mombasa into Nairobi and beyond the Kenyan borders. The government sponsored rail solution has been hailed and feared by various logistics players due to the impact this development is likely to have on road transporters in Kenya. However, Siginon Group, a transport and logistics company has embraced the SGR solution whole heartedly and further, through Siginon Global Logistics – its transport arm, invested in an additional 22 trucks to boost its current fleet in Kenya. The trucks comprise of prime movers with drop side trailers to satisfy customer demands for an efficient logistics partner in moving cargo inland. The trucks, purchased at a cost of Kes. 140 million will complement cargo movement that requires last mile logistics within Nairobi and other inland locations as well as on transit across the Kenyan borders to regional destinations within East Africa and the Great Lakes region such as Kampala in Uganda, South Sudan and others.
Job Kemboi the General Manager adds, “Shippers moving cargo on the SGR require a road transporter to move their cargo from the various ICDs to the destined inland locations be it warehouses, factories or homes. As such, transporters still have a role to play in complementing the SGR on the last mile. We have therefore boosted and aligned our transport services to meet this need satisfactorily.” The transport arm is further relocating its transport yard to a new 5 acre location in Mariakani to strategically position and ensure efficient fleet movement. Job Kemboi adds, “As Siginon Group, we are already using the SGR to move containers destined for inland and transit locations. In addition, we have engaged shipping lines for partnerships to ensure smooth and safe cargo delivery from SGR, via ICD up to the doorstep of the consignee.
Job concludes;” The Standard Gauge Railway (SGR) has greatly complimented cargo movement for road transporters. As such, an efficient trucking fleet will play a major role in ensuring customer satisfaction; facilitate last mile and regional cargo logistics. In Siginon, we will continue to scope the market for opportunities to exploit all the opportunities that come with SGR”
Real estate players have identified warehouses as a growing property class in Sub Saharan Africa. Unfortunately, the demand for warehouses outweighs the availability for the space required to satisfy consumers. The consumers today requires a modern warehouse space that is built to high technical specifications to support modern retailing, distribution and manufacturing practices. In addition to availability of a modern warehouse amenities such as security, power, water, internet access, access roads; today’s customers is increasingly demanding warehouses that enable convenient and efficient inventory management coupled with optimal use of warehouse space.
As such, Siginon Global Logistics has installed a state of the art system to streamline operations in its warehousing business. The new system enhances warehousing efficiency as well as gives customers the convenience to view their inventory remotely so long as there’s internet connection. The customers, through internet connected gadgets, will be able to remotely create orders, receive updates on stock movement and accurately locate inventory within the Siginon warehouse.
The cloud based system was installed at the Siginon Global Logistics, Nairobi warehouses in January 2018 and pre tested by a South African technology firm that has done similar installations across the globe. The 24 hour system will cover all inventories at the warehouses and comes with minimal pressure on the internet bandwidth. Winstone Akweyu, the Siginon Global Logistics Operations Manager adds, “The new warehouse management system has been driven by Siginon’s needed for continuous improvement, value addition as well as aligning the warehousing business with technological improvements in the logistics landscape.”
The Siginon warehousing customer today can today view their stock reports off site without the need for being physically present for a physical and usually tiring and time consuming stock take. This then provides the customer with the agility to make inventory decisions such as re-ordering, forecasting as well as maintaining just-in-time inventory to manage operational costs from any location.
Operationally, the system Siginon will provide great ease in generation of customer reports by interested as well as ease the billing process with an assurance of accuracy. Winstone concludes, “Today’s customer requires a warehousing partner who can add value to their business, give them peace of mind as well as be cost effective. This has to be world class. Therefore, the new Siginon Warehousing system inches us closer to where we want to be as a company; a World-class logistics provider.”
The logistics industry has seen a number of technological innovations that have provided customer satisfaction solutions that offer convenience, real time reports and cost savings.
By Meshack Kipturgo
While Kenya’s attention has been on the electioneering period, there have been a series of exciting acquisitions in the fresh produce industry that are gradually shaping the logistics industry particularly in the airfreight sector.
In the recent months, international logistics firms have snapped up Kenyan operators with a view to consolidate the gains and potential of the local perishables industry. These acquisitions are not only an endorsement by the international giants on the attractiveness and potential of the Kenya logistics industry but they will also shape the logistics industry; with benefits that will soon trickle down to all stakeholders.
The acquisitions of the local freight forwarders some of whom have held strong influence in Kenya’s fresh produce forwarding will open doors for the global firms to access the local fresh produce markets whose global demand continues to grow particularly in the European Union which has been a key market for fresh fruits, flowers, vegetables, all of which are sourced locally.
The recent acquisitions have also given the global players access to the Kenyan highly demanded market and in the process filled gaps in their logistics chains. With the backing of a large war chest backed by even stronger economies, we can speculate that there will be more acquisitions of local fresh produce freight forwarders, further consolidating the Kenyan market.
Tapping into the Kenyan market will also increase the scope of operations as the global freight forwarders will now have additional muscle to better negotiate for rates with airlines, warehouses and other related service providers and in turn drive down their costs of doing business, a boon for these transport and logistics firms. It is important to note that airlines, for one, are more willing to offer these global forwarders better rates than smaller competitors as the former can assure consistent and large volumes.
Due to the sensitivities of perishables exporting, exporters use more established companies that have world-class infrastructure that will ensure their produces fetches a premium price as buyers as well as assures the quality, freshness, well-packaged shipments delivered in a timely manner. As such, the Kenyan horticultural farmer stands to benefit by working with a global logistics company that has filled all the gaps in its value chain with chance to effectively market their produce in the key markets.
To the simple eye, the acquisitions taking place may appear to be a threat to local companies that have tirelessly worked over the years to meet international standards and access the fresh produce shipment market. However, this is far from it, these glo-cal (global and local) partnerships offer indigenous firms the opportunity to up their game to global standards and compete with global players.
At Siginon Group, we realized that as Kenya’s horticulture industry is growing, the tide will lift the ancillary fresh produce shipping industry to higher levels and this informed our decision to invest in Siginon Aviation’s Ksh1 billion cargo handling facility at Jomo Kenyatta International Airport (JKIA) in Nairobi as well as form partnerships with global cargo airlines serving key routes such as Europe, Middle East and Southern Africa to enable us to serve and effectively compete in these international markets.
Kenya is further set to soon commence direct flights to the US market following satisfying of statutory requirements for both countries. KQ should align itself to take first-mover advantage of this new route as the flagship airline for Kenya and freight shipments into the US. Direct US flights will create bigger market opportunities for the fresh produce airfreight industry in Kenya. The logistics players must therefore enhance their capacity to adequately serve exporters in these new markets as well as the traditional markets.
It is important to note that the wave of foreign and cash rich global companies buying up Kenyan firms is not limited to the fresh produce logistics market. The retail, banking, insurance and construction industries are also facing the same competition. However, the Kenyan companies in the aforementioned sectors continue to show great resilience in upping their game and thriving amidst strong competition. In fact in some areas such as banking and insurance, home grown brands command the lion’s share of the market. Local fresh produce shippers should also not be the exception by ceding the industry to global entrants. For the logistics industry to grow, we must show resilience, innovation and focus on meeting customer needs benchmarked globally.
The writer is the Group Managing Director at Siginon Group.