What Does Not Grow, Declines: Logistics in the EAC

Nakumatt and Uchumi can school supply chain firms in Kenya looking to conquer the EA region.

With improved and increased communications structures and trade relationships turning the world into the clichéd “global village”, industries are left with two choices: adapt and learn to use the environment to your advantage, or resist and decline.

For the logistics sector, the decision is simple: grow with the world. For supply chain firms in Kenya, the first step in this march forward would be to conquer what lies around us – the East African region. The climate for this expansion has never been better.

Kenya’s neighbors in the region, under the East African Community (EAC) blanket are doing their part in allowing for expansion of logistical operations across the member states. Favorable relations between the EAC member states have allowed for joint development projects geared toward promoting trade, such as the Arusha-Namanga-Athi River road, greatly easing functions of supply chain management, such as transportation of goods. Similarly helpful to the logistics industry was harmonization of key factors such as the vehicle weight limit within member states or standards of quality of goods for export, and the introduction of preferential tariff discounts.

The EAC is also currently in the path of important developments aimed at making it a more attractive region for trade and foreign investors. Efforts to strengthen the EAC have also come from external sources, such as the KES.630 million grant recently awarded to the EAC, COMESA, and SADC Tripartite Capacity Building Program (TCBP).

The African Development Bank, which provided the grant, has stated that the program is aimed at boosting the economic welfare of the 26 member states slated to benefit, by removing barriers to transfer of goods, developing regional value chains and stimulating economic activity in the process, thus providing employment opportunities. With a key focus on industrial and infrastructure development, the TCBP creates a wealth of potential business for the logistics industry, with enormous international growth potential that cannot be ignored.

The logistics industry must also learn from other industries that have blazed a trail in expansion into the larger East African region. One good example of this would be players in the Kenyan retail industry. Retail chain giant Nakumatt

Photo credit: Global Village Directory

Photo credit: Global Village Directory

recently announced the opening of their fifth branch in Uganda, a mall worth KES 382.5 million ($4.5 million). Having recognized the economic potential in the region, Nakumatt already has forty branches spread across East Africa, with continued plans for Ugandan expansion which include three other branch launches planned before the end of October.

Similarly, the Uchumi chain has made strides in East African occupation, achieving great success in neighboring Rwanda. So great has their performance been, in fact, that Uchumi shares have begun trading on the Rwandan stock exchange. Rwanda’s permanent secretary in the ministry of local government, Vincent Munyeshyaka, commended the move, stating that it gave Rwandan citizens a chance to own part of a highly successful venture, thereby making it a “part of the country”. Mr Munyeshyaka also expressed his hope that other private companies in Rwanda would follow suit and allow citizens the chance to invest in the stock market.

The success of retail industry players in East African markets not only provides inspiration for similar expansion from the logistics industry, it also directly creates freighting opportunities for internal and outsourced supply chain managers in getting stock of goods across the borders where needed, with local distribution being an option for goods produced within the countries in question.

With the universe seeming to conspire to make the East African region more hospitable to the logistics industry, it would be a catastrophic miscalculation to let expansion opportunities pass us by: what does not grow, declines and we as an industry, choose growth.

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