With improved efficiencies, the Port of Mombasa has the potential to tap
the growing trade opportunities in Africa. file photo | nmg
Improved efficiency and enhanced capacity at the Port of Mombasa
holds the key to positioning Kenya as Africa’s industrial hub,
logistics experts say.
This is particularly the case with the proposed creation of a free-trade zone on the continent, they add.
Kenya
has been on the frontline in pushing for implementation of the proposed
African Continental Free Trade Area (AfCFTA), becoming among the very
first nations to offer legal backing to the treaty through a Bill in the
National Assembly.
AfCFTA is expected to establish a
single market with duty-free access among traders in Africa in a bid to
spur industrialisation, infrastructure development and economic
diversification across the continent whose market is estimated in the
upwards of 1.2 billion people.
“About 80 per cent of trade will go through the port and if
those ports are not as efficient or reliable as they could be, then it
will have a direct impact on your competitiveness as a country and the
price of goods coming into the country,” said Andrew Shaw, the lead
transport and logistics consultant for Africa at PricewaterhouseCoopers
(PwC), in a recent interview in Nairobi.
“Ports can be the bottlenecks, but they can also be the conduits to enhancing trade for countries and regions.”
Africa
has been tipped as the next destination for global industrialists
fleeing rising operating costs in China, offering Kenya an opportunity
to position herself as a cost-effective location.
The
World Bank Group in 2011 estimated that about 80 million jobs were
likely to leave China this decade as light industries look for cheaper
investment destinations Africa their most likely destination.
In
a bid to increase the share of decent job opportunities, President
Uhuru Kenyatta has pledged to mobilise State resources to support growth
in manufacturing – one of the ‘Big Four Agenda’ in his legacy term to
August 2022, together with universal healthcare, food security and
affordable urban housing.
“Everybody is racing to
Africa. If we don’t get this game right, I don’t see how we are going to
grow manufacturing to 15 per cent of our GDP,” outgoing Kenya
Association of Manufacturers chairperson Flora Mutahi said in an
interview last February.
“Factors that drive
manufacturing are only two: competitiveness and access to markets. If we
don’t change that, it is not going be possible because we don’t enough
market.”
With
the proposed free movement of goods across Africa via the AfCFTA deal,
the PwC experts sees the Kenya’s relatively efficient and developed port
as a potential conduit for raw materials and finished goods into and
out of Africa.
“There’s an opportunity if you can
improve efficiencies at the port. You can take advantage of this one-way
flow and empty returns in the logistics chain, which could actually be
filled with exports from Kenya and the region,” Mr Shaw said.
“It
is very clear in our minds that Mombasa will come out as a hub port,
but it will require government to facilitate investments. It will
require the private sector to come in and provide very efficient
operations.”
This will involve creating sufficient
capacity at the facility and upgrading supportive infrastructure such as
railway and roads, thereby boosting Mombasa’s potential as a
transshipment port. The port will also have to lower logistical costs
through enhanced efficiencies in order to attract more giant shipping
lines.
A recent PwC report, titled ‘‘Strengthening
Africa’s Gateways to Trade,’’ however suggested that Mombasa is
underperforming its potential as transshipment hub in East and Central
Africa.
Presently
container ships deployed to Mombasa are smaller compared to those of
Durban in South Africa and ports in West Africa such as Lagos-Apapa and
Abidjan.
The capacity of container ships to East
African Coast is 2,900 to 5,000 Twenty Foot Equivalent Units (Teus)
compared with West Africa where the average container capacity is 5,500
Teus, peaking at 13,000 Teus, the PwC’s report says.
“Ports
that can accommodate larger vessels generally have a higher capacity
than comparable ports that can only handle smaller vessels,” PwC says in
in the report, published in Nairobi on April 12.
Reduced
logistics costs, together with facilitative legal, tax, judicial
systems, has been cited as key in attracting global industrialists into
Kenya under the manufacturing pillar which will require heavy foreign
direct investment flows.
The manufacturing sector’s
contribution to Kenya’s gross domestic product (GDP) – national wealth
– dipped to a multi-year low of 8.4 per cent in 2017, and the Jubilee
administration faces a tough task to grow this to the targeted 15 per
cent by 2022.
Manufacturers have said the target can
only be achieved if the sector grows by an average of 36 per cent every
year, given that its expansion slowed by 0.2 per cent last year from 2.7
per cent a year earlier, according to the Economic Survey 2018.
PwC
Kenya partner for capital projects and infrastructure Kuria Muchiru
said Kenya is competing with many other countries on the continent to
catch the eye of giant global manufacturers.
“If cost
of employment in China is higher than in Kenya, that’s a positive. But
then if the logistics costs in China is so much reduced and much more
efficient that it makes sense to incur that higher staff cost, then you
can still do it in China,” Mr Muchiru said.
“The
challenge is you have to create environment where industrialists come
in, and because we have a good population with high work ethics, we can
use that and say ‘come to this country and manufacture goods to export
either in region or to other regions’.”
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