July 31, 2015
By Meshack Kipturgo,
An efficient logistics chain remains one of the key tools for competitive advantage to be exploited in a growing economy such as that of Kenya. Every thriving economy relies on a backbone of an efficient supply chain that nurtures global trade and embraces global competitiveness.
Efficient logistics is a key contributor to a country’s global competitiveness. Various countries have gained trade muscle and boosted their economies by fully taking advantage and effectively controlling the supply chain to ensure that it nurtures and positively impacts global trade. For instance, Singapore despite being a small country boasts of being the most efficient country in logistics it is no wonder that in the 2011 World Bank Ease of Doing Business Index Singapore was ranked as the best country in the world to do business. Japan has cut its niche as the manufacturer of popular automobiles and electronics globally. Japan is home to 6 of the top 20 largest vehicle manufacturers, with Toyota being the highest sold vehicle globally.
Currently, Kenya in search of diversity amongst her trade partners has set her sights on the east. Asia is the fastest growing economic region and the largest continental economy by Gross Domestic Product (GDP) in the world. China is the largest economy in Asia and the second largest economy in the world. In addition, Asia is the continent with the highest population with China carrying over 1 billion inhabitants. The potential trade and impact into the Kenyan economy as a result of this new trade partnership is immense. However, the question begs, does Kenya have the capacity to reap the fruits of doing business with this trade giant?
On the Kenyan logistics front, key concerns include existence of the non-tariff barriers, state of infrastructure, security and the rising cost of fuel among others. In Kenya, the high cost of goods is to a large extent attributed purely to logistics. These are critical concerns that have directly impacted the cost of doing business in Kenya and threatened Kenya’s position as the regional business hub in East Africa. Neighboring countries such as Tanzania, Uganda and Rwanda have identified this gap as well and they are working on overdrive to sway investors into their markets by embarking on great infrastructural developments such as the construction of the USD 11B Bagamoyo Port, USD 164 new airport terminal in Tanzania as well as the Tanga-Musoma railway while Rwanda is pursuing investment in the air cargo industry including an airport free trade zone. All these initiatives are set to shift trade flow away from Kenya. Surely, Kenya should not be caught napping.
Thankfully, there are steps that the government has taken to expand our current infrastructure as well as regional partnerships that would smoothen trade amongst the East African community partners. Notably, the recently launched single window system, standard gauge railway, infrastructure development and expansion particularly at the port of Mombasa and the JKIA airport. However, to effectively tackle the current and emerging demands from our international markets the Kenya market needs to provide a safe and convenient environment for doing business to its potential investors. Some interventions include; building a dual carriageway on the Northern Corridor beginning from Mombasa all the way to the Malaba border. Partner countries in Rwanda and Uganda should also be convinced to extend the same dual carriage way. At the same time, there’s need to fast track the construction of the free port to enable Kenya to meet the demands of the growing markets. An airport free trade zone would also greatly boost our air cargo logistics. Regionally, it is prudent that the East African countries partner and negotiate with the global markets as one. Going it alone would overwhelm or literally exhaust the limited resources among these countries.
In the meantime, tackling the current trade hindrances while planning in the long term for business growth will go a long way into attracting more investments in Kenya as well as for East Africa as a vibrant trading region. In the longer term, innovative ideas should be considered for serve Kenya’s traditional markets from the west and the Asian markets.
Meshack Kipturgo is the Managing Director of Siginon Group, a source to doorstep logistics provider offering transport, warehousing, customs clearance, ground handling and container freight station based in Kenya, Uganda and Tanzania. Meshack also serves as the Chairman, Container Freight Station Association (CFSA) and Executive director in Shippers Council of East Africa.