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.

An International Air Transport Association (IATA) report states that the Aviation sector supports 6.2 million jobs in Africa or 2.6% of Africa’s GDP. However, since January 2020 over 185,000 pax have cancelled flights and vital cargo capacity disappeared. This has a negatively affected the airfreight sector whose goods primarily comprise of pharmaceuticals, chemicals, flowers, vegetables and fruits among others.

Flower exports to key markets such as the European Union (EU) have dropped by over 50% due to the result of the financial crisis caused by the COVID-19. The Dutch auction has been operating below capacity and eventually closed resulting in some farms suspending shipping of flowers due to the uncertainty in the market. In Kenya, perishable exports have taken a huge beating following last minute flight cancellations after the produce has been packaged and only awaiting loading onto cargo planes. In one instance, 10 tons of fresh export flowers decayed due to these cancelations resulting in a loss of approximately USD 120,000. Farmers have therefore begun disposing flowers worth millions of dollars for lack of markets while workers are being sent home either on leave or being made redundant. Export flowers are amongst Kenya’s leading foreign exchange earners and the impact of these cancellations will be felt all the way to the exchequer. Dr. Joy Kiiru, an economist at the University of Nairobi summarizes the resulting crisis as a disruption in the global supply chain affecting several sectors compounded by globalization and interdependence of economies.

Shipping from China to Kenya has reduced drastically with over 37 vessels being cancelled while others reported blank arrivals at the Port of Mombasa. These cancellations affected the cargo throughputs at the Kenya Ports Authority (KPA) and subsequently the supply chain with the Standard Gauge Railway (SGR) which hauls cargo from the Port to the Inland Container Deport (ICD) being most affected. This situation has been described as the worst in KPA history a reflection of Kenya’s over reliance on China imports which average 40% of the total port imports. The subsequent impact of these cancellations is a decline in cargo handled at the Port as well as a decline in revenue collection by the Customs Authority. The SGR, a major infrastructure project in Kenya is yet to settle its loan to the Chinese Government that is envisaged to be generated by the income collected via SGR from the Mombasa Port and ICD business. This deferral by the COVID-19 is most unwelcome and will jeopardize the Kenya government’s ability to pay the loan.

The manufacturing sector has been negatively affected due to its reliance on Asian countries, as the source of most intermediate inputs for manufacturing. As the epicenter of the COVID -19 outbreak, China’s factories have been shut down and workers placed on quarantine to contain the spread of the virus. Subsequently, countries which relied on china for exports of inputs are now operating on low inventory or paralyzed altogether due to lack of inputs to support local production. Reliance on Chinese expertise in the manufacturing sector has also been affected by travel restrictions thus stalling production pending an uplift of the same. As the world’s manufacturing capital, it is indeed true that when China sneezes, the world catches a cold.

Intra Africa trade has also taken a hit due to closure of borders amongst neighboring countries. Uganda closed its border, which borders Kenya, after its first case of the COVID-19 was announced. The move left commuters and truck drivers stranded as the announcement of the closure left most users flat footed. It’s important to note that Uganda is Kenya’s biggest trading partner in the East Africa Community (EAC). According to Kenya’s Economic Survey 2019, the value of imports from Uganda to Kenya rose to KES 49. 4 billion in 2018, on account of increased imports of maize, animal feeds, milk and sugar. The border closures will hamper the flow of trade resulting in a low revenues and volumes on goods traded. Other countries that have adopted similar stances to safeguard and control its public are Kenya, Rwanda, Nigeria which closed its airports to all incoming international flights while Tunisia imposed a lock down.

IATA Alexandre de Juniac, IATA’s Director General and CEO aptly states, “Today, as we fight a global health war against COVID-19, governments must take urgent action to facilitate air cargo. Keeping cargo flowing will save lives,” The impact of the COVID-19 continues to be felt across global markets and the aftershocks will be felt into the foreseeable future. The pandemic has now more than ever highlighted the trade interdependence amongst countries and questioned the strengths and weakness of markets traditionally referred to as superpowers in the face of crisis of this nature. It also highlights the critical role logistics entities play in the restoration of markets and trade through the provision of relief supplies such as medical supplies, pharmaceuticals, PPEs and in worst hit areas – relief food.

The COVID-19 pandemic has reaffirmed the critical role that efficient supply chains play in resolving global crisis such as these and restoration of trade and economies.

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.

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.

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.

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.”

References:

ISO 9001: 2015: https://www.iso.org/iso-9001-quality-management.html

ISO 22000: https://www.iso.org/iso-22000-food-safety-management.html

ISAGO: https://www.iata.org/whatwedo/safety/audit/isago/Pages/index.aspx

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.