Kenya’s vision to move to a middle-income economy driven by industrial transformation is hinged on its ability upscale the manufacturing sector and offer products that are competitive into the market. The Kenyan manufacturing sector has often agitated for solutions to the challenges the industry faces primarily, regulatory inefficiencies, high production costs, logistics, cash flow and liquidity challenges. These have been aptly summarized in the Kenya Association of Manufacturing (KAM) Manufacturing Priority Agenda 2021.
Transport and logistics inefficiencies at the port of Mombasa and the Nairobi Inland Container Depot have been highlighted as key manufacturing pain points. The high cost of transportation and delays during cargo clearance and evacuation of both raw material and finished goods has made it difficult for Kenya to produce competitive products. These costs have ended up in payment of high demurrage charges and delayed overall operations at manufacturing plants due to logistical hitches.
At a previous media engagement, the KAM Chief Executive Phyllis Wakiaga decried the port challenges particularly with clearance at the port and minimum tax. As a result of these inefficiencies the cost of products are affected and unfortunately passed on to the consumer.
There is no doubt that for the manufacturing sector to thrive, it must be supported by a well-oiled supply chain system that is guided by strategies and policies that encourage swift and cost-effective import and export of raw materials and finished goods. However, this is not always the case, players in the logistics sector find themselves stuck between a rock and a hard place when it comes to meeting and satisfying customer needs while ensuring their business breaks even. The over regulated logistics industry often must contend with challenges such as fuel hikes, traffic jams, poor road networks and border delays which then dilute the ambition for consistent service delivery in this capital-intensive sector. However, due to Kenya’s unique position in the region, the demand for service remains high indicating the critical role logistics players in serving various economic sectors.
Job Kemboi, Siginon Group’s Commercial Manager asserts that a healthy logistics sector will see all the other economic sectors thrive and prosper in Kenya and beyond the region. The Kenyan economy being a net importer of goods indicates that all sectors rely on our ports to efficiently import raw materials or finished products to enable them to focus on their trade. The demand for logistics via Kenyan ports extends to the larger East African region with customers from EAC and the Great Lakes regions using the Port of Mombasa to move their cargo.
The COVID-19 pandemic led to a disruption of supply chains across the globe. In Kenya, the disruption posed great challenges to the manufacturers who sourced raw materials and plant inputs abroad and relied on the ports and logistics companies to efficiently receive and evacuate the cargo onwards to their operations. Such disruption led to product shortages, price hikes and higher costs in manufacturing operations. Ultimately, the end user suffers the brunt of these challenges by paying through their nose to access certain products or bear the inconvenience of not having certain products available for purchase. This further exposed Kenya’s over reliance on imported goods as an achelis heel and that such disruptions to the supply chain could bring the economy to a complete stand still.
With China as the world’s manufacturing house, there are several lessons from the supply chain disruption caused by the COVID-19 pandemic. An optimally functioning logistics industry will contribute to growth for all economic sectors and even open new markets for goods produced in Kenya and East Africa. In addition, matters pertaining to traffic jams are no longer social concerns but derailers to economic growth and even discourages investor interest due to time wasted in traffic. Goods ‘stuck’ at the port due to over burdening regulations have a direct effect on the publics ability to access essential products and high prices.
Logistics as a business enabler cannot be overstated. Economic growth in Kenya can only be achieved once the logistics environment is nurtured, invested in and aligned to the felt needs of the consumer.