Finding the Silver Lining: Kenya’s Economic Hope in 2013

Financial news in this past year has been a series of doom and gloom reports in rapid succession: news of recession, spiking oil prices and a general global economic downturn have plagued us, making us wary of making investments with little promise of returns.

In Kenya, however, this does not hold true, especially for those operating in the supply chain management industry. The tail end of 2013 holds nothing but promise for investors in logistics and logistics players, even as Kenya proceeds with her quite but steady progress, undeterred by international events and disheartening tragedies within our borders.

Towards the end of September, the Treasury issued a prediction that Kenya’s economy would be stronger in the second half of the year. National Treasury Cabinet Secretary, Henry Rotich announced that while the first half of the year recorded economic growth of 4.7 percent, the closing months of 2013 would see a 5.5 percent growth.

The growth indicated is set to be fueled by the agricultural and services sector, both of which generate strong revenue for the logistics industry both internally and in exports or import. A stronger economy also means increased purchasing power of citizens, meaning more need to freight goods around the country in order to meet demand – a positive development for supply chain management firms operating in local shipping.

Fruit LogisticsGoing side by side with this growth prediction is the decision to drastically reform Kenyan parastatals in hopes of ensuring that key leadership positions are held by persons qualified for those jobs. The State House-based task-force on parastatal reforms has begun an admirable campaign to clean up the top tiers of parastatal bodies charged with providing vital services to Kenyan citizens. The task force’s recommendations, should they be implemented, would call for Chairmen of such organizations to have minimum 5 years experience in senior management and hold a Master’s degree in order to retain their offices.

While these proposed reforms have Kenya Power, GDC and CCK in their sights as the first firms to be corrected, one can only hope that these and other recommendations will touch parastatals that govern logistical functions like  clearing and forwarding, such as the KRA or KPA. With well qualified, visionary leaders in place, efficiency rates will sky rocket, with processes being streamlined and better managed to ensure reduced wait times and overall better service. Supply chain management players will enjoy the perks of properly managed facilities, with improved provision of service to clients, increased business and naturally, an increase in profits.

Some parastatal bodies have been working independently to improve their efficiency, such as the KRA, which is now tapping into third party data to ensure full payment of all taxes owed. The KRA Commissioner-General, John Njiraini, has expressed that KRA intends to cooperate with banks to track transaction records and bank statements so as to identify tax defaulters.

Not only will this move ensure increased revenue for the government to use to the benefit of the logistics industry, e.g. by improving infrastructure, it also heralds a new age of inter-agency cooperation. Cooperation with KRA will force banks that have not embraced e-commerce to take a step forward, resulting in quicker processing of transactions to and by supply chain management firms as well as the rest of the industry.

At present, Kenya is also a veritable gold mine of entrepreneurs and new industrial opportunities waiting to be developed. Logistics firms can find valuable clients in these emerging industries, most of which are in need of such support systems to guarantee their success.

A prime example of this would be the coconut industry, based mainly in Kwale, where Canadian investors have sunk in KES 860 million to establish a factory that produces coconut oil and desiccated coconut. Most of these products are then entrusted to logistics firms for export: where last year Kenya made KES 6 billion from exporting of raw coconuts, the processed goods derived from them could net up to KES 25 billion going forward, a decent chunk of which will come to the supply chain management sector.

The lesson we take away here is twofold: one, that it is necessary to look inward for indicators of financial progress or potential, and secondly, that the logistics industry will endure. Even in the face of fiscal downturn the world over, Kenya’s economic rays of hope are not extinguished, and with them, the flame of the logistics industry burns bright.

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