The COVID-19 pandemic has dealt a massive blow to the global economy. On the supply side, factories and businesses have been forced to close temporarily due to the shortage of input materials from suppliers and the need to protect workers. Demand is declining, too, as consumers stay home and face the prospect of a large-scale economic downturn.
Against this backdrop, the March 2020 purchasing managers’ index (PMI), which reflects the economic health of the manufacturing sector, slumped to a 92-month low in the Eurozone and also decreased significantly in most Southeast Asian countries.
The world is today grappling with the Corona Virus (COVID-19) that has continued to snuff out the life of thousands across the globe. This newly discovered infectious disease has threatened human existence as its infection rates soar from different corners of the globe. Having initially began in Wuhan, a Port City in China the COVID -19 has rapidly spread to other parts of the world paralyzing economies, trade and human safety of countries affected. As a response to battle the spread of the disease, countries have taken necessary measures such as closing of border points, lock downs, quarantine and curfews to encourage social distancing as well as limit movements to forestall further spread of the disease. With these interventions, trade and businesses have been paralyzed pushing economies to the brink of collapse and crashing of stock markets globally.
The transport and logistics sector is a major victim of the COVID-19. The industry, which is driven by facilitating cargo movement to or from different geographical locations, supports key economic sectors such as manufacturing, agriculture, aid and relief, construction, education amongst others. However, the interventions to stop the spread of the COVID -19 have made it challenge if not impossible to move goods from point A to B thus affecting trade between regions. (more…)
“The rose is a flower of love. The world has acclaimed it for centuries. Pink roses are for love hopeful and expectant. White roses are for love dead or forsaken, but the red roses, ah the red roses are for love triumphant. “– Unknown
The month of February is here with us, and for the lovers among us, 14th February is the prescribed day to express love to each other as we celebrate Valentine’s Day. In many parts of the world, Valentine’s Day is the celebration of romance and romantic love. The celebration is incomplete without the exchange of gifts usually, chocolates, wine and teddy bears. I dare say, Valentine’s celebrations are incomplete without red roses. The demand for red rose is at its peak at various points of sale across the globe during the Valentines season.
Kenya is a key player in bring to reality those valentines’ moments. As a leading world exporter of flowers, Kenya ensures that global Valentine celebrations are well supplied with red roses to fit the occasion. The demand for cut flower exports peak in January to meet the annual demand that comes with the Valentines season in February. Flower sellers across the globe cash in on sales of red roses especially during Valentines period. Clement Tulezi, the Director of the Kenya Flower Council states, that Kenyan flowers are sold in more than sixty countries, mainly in the European Union, Russia and the United States. He links the popularity of Kenyan flowers to the grower’s compliance to high standards, which has positioned Kenya as a producer of top-quality flowers. He adds, “One of the main reasons of the consistent growth of our industry is the quality of our flowers”. Consequently, Kenya is today the third largest exporter of cut flowers in the world and the horticultural sector plays a major role as a foreign exchange earner for the Kenyan economy.
The Kenyan rose has endeared itself to the global market due to its colours, varieties, size of the head as well as its availability all year. Kenya experiences favourable weather due to its location adjacent to the equator. The Kenyan climate does not suffer extreme high or low temperatures as is common in the markets Kenya serves. In addition, the Kenyan government and private sector players have invested heavily in logistics infrastructure that enable swift movement of flowers from the farm and onwards to the international markets. Today, the road networks to and from the farms have been well maintained and developed allowing for swift movement a factor that contributes to preserving the flower quality at the prescribed temperatures. To maintain the cool-chain, logistics players use refrigerated trucks and cold rooms that ensure the flower temperatures are maintained from the farm, truck, warehouse and onwards to the market. (more…)
The year 2020 marks the beginning of new decade. The logistics industry across the globe has experienced great disruptions from the year 2010 to the close of the decade emanating from various macro and micro economic factors. Notable upheavals include automation of key processes, a tightened regulatory environment and customer inclination for control and real time information on their shipments regardless of time or location, no doubt an indication of the shrinking global village. The year 2019 stretched thin the logistics players in Kenya and the region and to an unfortunate few, the stretch eventually led to shutdowns, job layoffs and sadly an increase on prosecutions arising from failing to meet contractual obligations.
The year 2020 logistics outlook seems to carry over some of that uncertainty particularly for players in the cargo transportation sector. Events in the global arena have shaped costs of doing business and negatively impacted the cost of key inputs. Some of these events include the US-Iran tensions that have directly hiked global fuel prices, a key component for operation. These additional costs will no doubt increase the cost of goods to an already burdened customer suffering from a myriad of taxes.
The Standard Gauge Railway (SGR), which was launched in 2018, will put to task the business model for transporters who previously relied on business from cargo off loaded from the Port of Mombasa and recently from the Inland Container Depot in Embakasi (ICDE). The SGR is now in full operation with increased pressure from the government to ensure that all goods imported into Kenya are loaded onto the SGR and ferried inland into Nairobi cutting off the gravy train for transporters. The expansion of the network further inland into Naivasha and future plans of linking it to the metre gauge rail (MGR) onwards to Kisumu and Kampala will tremendously reduce cargo volumes and cripple transporters who have been ferrying transit cargo from the ICD in Nairobi/Mombasa for cargo destined to Uganda, Rwanda, South Sudan and beyond.
Major infrastructure projects in the region are set to catalyze logistics in the region threatening Kenya’s position as East Africa’s capital. Notable projects include Ethiopia’s construction of the USD 5 billion airport while Rwanda is set to build a mega airport in partnership with Qatar Airways. The completion of these projects will steal the shine off Kenya’s Jomo Kenyatta International Airport (JKIA) and entice major freighters and forwarders away from Kenya to terminate at either of these airports.
The Kenya Customs Agents and Freight Forwarders Bill 2020 will play a great role in regulating the mode of operations by Clearing Agents. The Bill seeks to enhance service delivery in customs clearance by eliminating cargo delays, improve cargo flow, improve revenue collection by the revenue authority and lower the cost of doing business. The bill will boost the credibility of clearing and forwarding sector by registering licensed agents as well as detailing consequences for those operating outside the confines of the act. This will no doubt clean up the clearing agent’s fraternity. The new International Maritime Organisation (IMO) global sulphur cap 2020 rule came into force starting January 1 this year. The Kenya Ports Authority (KPA), which is a signatory, has licensed 2 companies to supply low Sulphur fuel for ships making call at the Port of Mombasa. The global Sulphur cap 2020 applies to all seagoing vessels, both cargo and fishing vessels and is aimed at reducing air pollution by cutting sulphur oxide emissions. The move to cleaner fuels could add substantially to logistics costs, from an estimated $400 a tonne for fuel oil today to as much as $600 a tonne, according to the International Chamber of Shipping. It is likely that the higher shipping costs may be absorbed throughout the manufacturing and transport supply chains
2020 also comes with great opportunities for trade in markets like the United Kingdom (UK) who have reaffirmed their interest to trade with Africa following Brexit. The resultant relationship will likely see an increase of exports of key UK exports such as; motor vehicles, chemicals and finished products as well as a number of imports from Africa into UK such as flowers, perishables and raw materials. Trade between neighboring East African countries such as Kenya and Uganda are likely to grow with the Kenya government’s provision of ICD’s in Naivasha for transit shipments. Demand for warehousing space adjacent to the ICD’s in Nairobi and Naivasha is set to spike. The spike will present a huge opportunity for free and bonded warehouses to serve customers using the SGR as well as align with the lucrative E-commerce sector.
We remain optimistic that despite the potential challenges seen in the sector, the logistics sector comes with great opportunities that remain to be tapped for prosperity now and in future.
The 2018 United Nations Conference on the Trade and Development (UNCTAD) Business-to-Consumer E-commerce Index ranked Kenya in 7th position in ecommerce uptake in Africa and position 85th globally. Leading the Africa pack is Mauritius, Nigeria, South Africa, Tunisia, Morocco and Ghana respectively. Globally, Netherlands took the lead having improved from a being placed 4th on the same in 2017. While Africa needs to boost Internet penetration to grow e-commerce, it also needs to get more of her existing Internet users to trust the online market for making purchases, secure servers, bank accounts, a clearly marked and mapped address system.
The UNCTAD report further estimates that that the B2C e-commerce market in Africa is worth about $ 5.7 billion in 2017, which corresponds to less than 0.5% of GDP, far below the global average of over 4%. However, the uptake of eCommerce in Africa has seen online shoppers surge at an annual rate of 18% which is way above the global rate of 12%. There is no doubt that e commerce is fast emerging as a new frontier in Africa and in the global market. As eCommerce continues to grow, retailers need to expand their distribution networks, build more fulfillment centers, and leverage more on 3PL partners. At the same time, online retailers must place greater focus on conveniently locating their fulfillment centers close to their markets to facilitate faster deliveries. (more…)
Transport and logistics firms continue to ensure their service levels are benchmarked against global standards to boost customer satisfaction. Across the logistics service spectrum, various industry bodies provide certification options to guide quality standards that specify service levels.
In 2018, Siginon Group pursued recertification to the latest ISO 9001: 2015 quality management standard and ISO 22000 food safety management standard. The ISO 9001:2015 QMS provides guidance and tools for companies and organizations who want to ensure that their products and services consistently meet customer’s requirements, and that quality is consistently improved. The recertification extended to all the Siginon Group business units of; Siginon Aviation, Siginon Global Logistics and Siginon CFS. ISO ensures that customers get consistent, good quality products and services, which in turn brings many business benefits. The ISO 22000 food safety management standard ensures that an organization controls food safety hazards in order to ensure that food is safe. In logistics companies, it certifies the food handling process on commodities especially tea exports, that require logistics services such as transportation, warehousing and clearance during export from the key entry points in Kenya.
In general, ISO International Standards assure customers that products and services are safe, reliable and of good quality. In business, they are strategic tools that reduce costs by minimizing waste and errors and increasing productivity.
Another notable certification in the aviation include IATA Safety Audit for Ground Operators (ISAGO). ISAGO, under the International Air Transport Association (IATA), is an internationally known system that examines the operational management and control systems of ground handling organizations. Siginon Aviation, the ground handling arm of the Siginon Group, was in 2018 ISAGO recertified for the third time since the year 2014. ISAGO recertification is conducted every two years over following an audit in the areas of; ORM (Organization and Management), CGM (Cargo and Mail Handling), HDL (Aircraft Handling and Loading) and AGM (Aircraft Ground Movement). IATA describes ISAGO as “a backbone of audit standards applicable to all ground handling companies worldwide, coupled with a uniform set of standards relevant for the specific activities of any ground handler. “ Airline customers who engage ISAGO certified ground handlers across the globe will benefit from ; improved safety, cost reductions as well as standardized services.
Global certifications standard are key tools of business competitiveness across various enterprises. Siginon’s customer groups locally and global are therefore assured that the service quality and standards meet global standards with no compromise on quality. The customer also benefits from reduced costs due to operational inefficiencies/delays, accidents and losses.
Siginon Group continues to pursue the highest standards in service delivery across all its services in pursuit of its ambitious vision, “To be a world-class logistics company.”
ISO 9001: 2015: https://www.iso.org/iso-9001-quality-management.html
ISO 22000: https://www.iso.org/iso-22000-food-safety-management.html
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.