The roads and railways network are key drivers accelerating growth in the country’s logistics sector, estimated to hit $5 billion (Sh500 billion) by 2023.
Other central factors are harmonized levies for foreign investors, increasing retail and e-commerce space and the Kenya’s strategic location, according to Ken research, an India-based, global aggregator and publisher of market intelligence, equity and economy reports.
The report notes that the Sh180.9 billion allocated for on-going roads construction projects as well as the rehabilitation and maintenance of roads across the country will propel growth of the logistics sector.
The research that covered road, railway, sea, pipeline, air freight forwarding, international and domestic freight, integrated and 3PL freight also noted that part of the growth stimulant include the Sh55.8 billion provided for the completion of Phase 2A of the standard gauge railway (SGR), Sh11 billion for the Lapsset project, and Sh7.2 billion and Sh3 billion for development of Mombasa and Kisumu ports respectively.
Further, increased trade with China, and entry of other players, Nairobi County government’s plans to reduce levies for foreign investors, and Kenya’s bid to facilitate global investors to acquire land for setting up special economic zones (SEZs) in Mombasa, Kisumu and Lamu, have stimulated the sector’s growth.
Moreover, technology disruption has enabled increase in e-commerce shipments revenue from the courier, express and parcel market is expected to double, the study says.
Kenya’s bilateral and free trade agreements with various countries, along with deeper involvement in initiatives such as Comesa, ACP and Agoa is expected to improve substantially.
Kenya is also a member country of Comesa and the East African Community (EAC).
With the African Continental Free Trade Agreement, the report notes, Kenya now has free access to the entire African market, with direct flights to the US also playing a key role in the sector.
Also, the report notes, the country’s strategic location in the great Lakes region, and increasing volumes and value of foreign trade, have been key to growth.
With the stable demand of Kenyan cut flowers in European market and other horticulture exports to China and other regions, cold chain market in Kenya will also be stimulated, it says.
Technology disruption witnesses in the sector include real-time fuel management system, cargo management systems and communication and information systems such as EDI which can be used to reduce paperwork and minimise time taken for compliance procedures.
With recent spawning of industrial parks and modern warehousing complexes, technologies such as EDI, drones, robots and cloud technology are expected to make an entry in the Kenya market.
“Logistics is vital for the economic performance of any economy. Kenya, like other African countries, has structural issues such as logistics infrastructure but the ease of doing business and favourable political climate has steered it ahead in the race,” the report says.
Kenya logistics market has witnessed positive growth over the past few years. In 2018, Kenya was ranked 61 in the East of Doing Business Index and rank 68 in the Logistics Performance Index.
The report notes that road transport dominates the freight forwarding market. Road transport is the main means of delivery in remote regions, to the landlocked neighbouring countries, and for the last mile.
Second is freight through sea transport, mainly used for international freight since the Mombasa port is one of the largest commercial ports in Africa. Freight through rail transport, according to the report, is minimal at present and is expected to grow with introduction of SGR.
The market share of domestic freight against international freight increased in the last few years, with the increase in share of domestic freight driven by government emphasis on manufacturing, included the Big Four Agenda under Vision 2030.
The major end users of freight forwarding services in Kenya include the food and beverage, FMCG and industrial sectors.
The food and beverage sector also create a demand for cold transportation for perishable items.
According to the report, Kenyan freight forwarding market constitutes numerous small and medium enterprises. Due to infrastructural challenges, big market players prefer to outsource services to local transporters and focus on their core competencies.
The Kenya freight forwarding market is highly scattered with over 400 domestic and international players. While the international players are few, they control about 70 percent of the market. The multi service firms are mostly international, while almost all transporters and truckers are local and regional.
“The industry is at a growth stage in terms of parameters such as technology, efficiency, service portfolio and pricing,” the report says.
The market is expected to grow at a double-digit with key growth drivers including rising demand for products through online purchases which has augmented the e-commerce market.
The increasing international trade volumes and domestic manufacturing are expected to increase the demand of freight forwarding services.
Support us by following us on Google News to ensure you don’t miss out on any future updates.
Send comments, press releases, tips, and guest posts to firstname.lastname@example.org.