Kenya airways in trouble as loss deepen to US$74 million

Fuel, personnel and cost of aircraft remain top drivers of the airline’s costs

Kenya’s national carrier-Kenya Airways has posted a Ksh7.558 billion (USD74.6 million ) net loss for the year ended December 2018, as higher operating costs continue to eat into its improving revenues.

The airline which has changed its reporting period (end year) from March 31 to December 31, had a Ksh6.418 billion (USD63.5 million) loss in the 9-month period between April 1, and Dec 31, 2017.

This is despite the airline’s growth in total revenue for the 12 months which increased to Ksh114.45 billion (USD1.13 billion), compared to Ksh80.79 billion (USD789.7 million) for the nine month period ended December 31, 2017.

According to the management, fuel, personnel and the cost of aircraft remain the top three drivers of the airline’s costs, contributing to about two thirds of total operating costs.

“Fuel price volatility remains a major challenge for airlines around the world, and Kenya Airways is no exception,” Chairman Michael Joseph said as the carrier released its results on Tuesday.

According to KQ’s management, the price of oil per barrel saw an upward trend from the beginning of the year before reducing in the last three months of the year.

“As a result we saw our fuel costs rise by 73.6 per cent from Ksh19 billion (USD187.8 million) incurred in the nine months period in 2017 to Ksh33 billion (USD362.2 million) in the full year ended December 2018. The total cost of fuel in the 12-month period of 2017 was Sh25.5 billion(USD252.1 million), a 30 per cent increase,” Joseph said.

Fleet ownership costs also increased to Ksh18.9 billion (USD 186.9 million) from a restated amount of Ksh12.5 billion (USD 123.6 million) incurred in the previous nine months.

“The 2018 results are not directly comparable with the 2017 results as it is a representation of 12 months against the nine months in 2017. Were the 2017 results to be annualized, there would have been improvement in the results for the year,” the management notes in its financial statement for the year under review.

KQ has been struggling with loses since 2015 when it reported a Ksh25.7 billion loss (USD254.1 million). Things worsened in 2016 when the airline sunk deeper into losses reporting a loss of Ksh26.2 billion (USD259 million).

READ:Kenya Airways posts a $38.7 million loss in 2018 half year results

The carrier has however been making strides in improving its revenue stream through a number of initiatives, including additional routes.

Last year, growth in passenger revenue boosted its total revenues from Ksh63.9 billion (USD631.7 million) in the previous nine month period of 2017 to Ksh88.7 billion (USD876.9 million) in the year ended December 31, 2018.

Passenger numbers were 4.84 million at close of December 2018, while the nine-month period ended December 2017 recorded 3.43 million passengers. The airline achieved a cabin factor of 77.6 per cent (12 months compared to 76.2 per cent in the nine months of 2017.

In addition to the growth in passenger revenues, revenue from cargo amounted to Ksh8.68 billion (USD85.8 million) for the year 2018 compared to Ksh5.7 billion (USD56.4 million)  in the nine months of 2017.

“Kenya Airways continues to focus on delivering the turnaround programme that we embarked on in 2016. In the last year ended December 31, 2018, the capital optimization programme dubbed ‘project safari’  was completed. We have also undertaken various actions to ensure financial and operating efficiency to enhance business sustainability,” Joseph said.

KQ hired Polish CEO Sebastian Mikosz in 2017 to help turnaround the loss making carrier.

READ:Polish CEO Mikosz taxiing Kenya airways back to profit runway

The carrier is hoping its new routes, including the long haul Nairobi-New York route which commenced in October last year, will help boost its revenues as it works on its turnaround strategy.

ALSO READ:History made: From Kenya to New York with KQ’s inaugural direct flight

“We are on the right direction to turn this airline around and make it once more the pride of Africa,” Joseph had said last year when the carrier narrowed its losses to Ksh4 billion(USD39.6 million)  in half year to June 2018.

 

 

 

 

Kenya’s biggest trading partners, Uganda tops EAC

China dominates as Kenya’s top import source globally 

Uganda is Kenya’s biggest trading partner within the East Africa Community (EAC), latest data show, with China dominating the global scene.

The Economic survey (2019) shows total trade volumes (import and exports) between Kenya and Uganda in the year 2018, were valued at Ksh111.3 billion (USD1.09 billion).

Tanzania comes in a distant second with a total trade value of Ksh47.6 billion (USD468.9 million) while Rwanda is third with Ksh19 billion (USD187.2 million).

Trade with DR Congo, South Sudan and Burundi, mainly export markets for Kenya, were valued at Ksh15.2 billion (USD149.6 million), Ksh12.9 billion (USD127.1 million) and Ksh6.6 billion (USD65.02 million) respectively.

Uganda

During the year under review, Uganda increased the value of its exports to Kenya by 17.6 per cent to close at Ksh49.4 billion (USD486.7 million), from Ksh42 billion (USD413.8 million) in 2017.

READ:Uganda keen on enhancing exports to EA region

“The value of imports from Uganda rose largely driven by increased imports of maize, sugar, milk and animal feeds,” the Kenya National Bureau of Statistics (KNBS) has noted.

Kenya however exported more to her neighbour where total volumes were valued at Ksh61.9 billion (USD 609.9 million),a slight increase from Ksh61.8 billion (USD608.9 million).

Uganda exports to Kenya include wood and articles of wood, wood charcoal, fodder, mineral, cereals, dairy products, honey, edible products, sugars and sugar confectionery, coffee, tea, mate and spices, tobacco and manufactures tobacco substitutes among other products.

In return, Kenya exports salt, sulphur, earth, stone, plaster, lime and cement, mineral fuels, oils, distillation products, plastics, pharmaceutical products, vehicles, beverages, spirits and vinegar, soaps, lubricants, waxes, candles, modeling pastes among others.

Tanzania

The value of imports into Kenya from Tanzania increased by 3.5 per cent to Ksh17.8 billion (USD175.4 million) up from Ksh17.2 billion (USD169.5 million), mainly on live animals, cereals, beverages, spirits and vinegar, fertilizers, mineral fuels, oils, distillation products and textile articles.

Kenya exports to Tanzania on the other hands gained marginally to close at Ksh29.8 billion (USD293.6 million) from Ksh28.5 billion (USD280.8 million), despite the existing tariffs and Non-Tariff Barriers (NTBs) between the two states.

READ:Kenya, Tanzania mistrusts ripping apart the EAC

Last year, the two EAC member states were entangled in a trade war after Dar es Salaam denied unrestricted entry of Kenyan made chocolate, ice cream, biscuits and sweets entry into its market.

Nairobi retariated by imposing new tariffs on Tanzania products such as flour with both breaching the EAC common market protocol, which allows free movement of locally manufactured goods.

Presidents Uhuru Kenyatta and John Magufuli have on several occasions directed their ministers to resolve outstanding trade disputes, to pave way for increased trade between the two countries and the region as a whole.

ALSO READ:Why Magufuli, Kenyatta are worried over Kenya-Tanzania borders

Rwanda and the rest of EAC

The President Paul Kagame led country lost ground on its exports to Kenya where the value dropped by 29.4 per cent to close at Ksh1.2 billion (USD 11.8 million) from Ksh1.7 billion (USD16.7 million) in 2017.

This is expected to further dwindle based on the recent tiff with Uganda which has led the closure of borders, with Uganda being the main transit route between Kenya and Rwanda.

Kenya’s exports to Rwanda however surged to Ksh17.8 billion (USD175.4 million) from Ksh17.1 billion (USD168.5 million) in value.

Those to DR Congo, South Sudan, and Burundi however dropped to Ksh15.2 billion (USD149.6 million), Ksh12.9 billion (USD127.1 million) and Ksh16.8 billion (USD165.5 million), from Ksh18.9 billion (USD186.2 million), Ksh6.6 billion (USD 65 million) and Ksh7.4 billion (USD72.9 million) respectively.

“This was occasioned mainly by the political instability in these regions,” a trade expert told The Exchange.

EAC and Africa

Kenya’s total imports (value) from her EAC peers totaled Ksh68.4 billion (USD 673.9 million) an upward trend compared to Ksh60.9 billion (USD 600 million) the previous year.

READ:EAC bloc has made significant gains in reducing trade bottlenecks

The East Africa economic power house however lost ground on her exports to the regional markets where the total value dropped 1.9 per cent to close at Ksh129 billion (USD1.27 billion), from Ksh131.6 billion (USD1.29 billion) the previous year.

In the continent, South Africa topped as Kenya’s biggest trading partner with the trade being in favour of the southern country.

This is on the Ksh64.7 billion (USD637.4 million) worth of imports from SA up from Ksh61.9 billion (USD609.8 million), against exports valued at Ksh4.4 billion (USD43.3 million). Kenya however gained 57.1 per cent from Ksh2.8 billion (USD 27.6 million) a year earlier.

Other notable trading partners in Africa include Egypt where the country exported to, goods worth Ksh201. Billion (USD198 million), and Somalia whose imports from Kenya in the year amounted to Ksh15.1 billion (USD148.8 million).

Imports from Swaziland were valued at Ksh8.6 billion (USD84.7 million) a drop from Ksh11.2 billion (USD110.3 million ) in 2017, while those from Zambia closed the year at Ksh6.9 billion (USD67.9 million) after dropping from Ksh7.7 billion (USD75.8 million).

Mauritius, another key trading partner exported goods worth Ksh6.1 billion (USD 60.1 million) to Kenya, a drop compared to Ksh7.3 billion (USD 71.9 million) in 2017.

During the year, total imports from the African market were valued Ksh205.9 billion (USD 2.03 billion) a slight increase from Ksh200.5 billion (USD 1.98 billion) the previous year.

That of exports however dropped slightly, by 3.4 per cent, to close at Ksh216.2 billion (USD 2.13 billion) compared Ksh223.9 billion (USD 2.21 billion) the previous year, meaning Kenya lost its export market share in intra-Africa trade.

China and the World

China continues to dominate as the top source of imports into the country in the global scenario, despite losing five percentage points on its trade with Kenya last year.

READ:US-China rivalry to shape Kenya, Africa’s foreign policy in 2019

According to the survey released this week, imports from china were valued at Ksh370.8 billion (USD3.65 billion) in 2018, a slight drop from 390.6 billion (USD3.85 billion) the previous year.

India comes in a distant second where imports from the Far East nation totaled Ksh185.3 billion (USD1.83 billion). This was however an increase from Ksh170.4 billion (USD 1.68 billion) worth of imports into the country in 2017, mainly on account of medicinal and pharmaceutical products.

The drop in the value of imports from china is seen as a result of reduced importation of machinery and equipment, related to the construction of the standard gauge railway, whose phase two-Nairobi-Mai Mahiu is 91 per cent complete.

Major Chinese imports to Kenya include machinery, electronics, motorcycles, motor vehicles spare parts, furniture and clothes.

Other top import sources for the country are Saudi Arabia and the United Arab Emirates (UAE), where total imports were valued at Ksh172.7 billion (USD 1.70 billion) and Ksh147 billion (USD 1.45 billion ) respectively.

The Asian continent remains the top source of imports into the country having closed at a total of Ksh1.168 trillion (USD 11.5 billion) in value last year.

It is followed by Middle East whose imports closed the year at Ksh355.7 billion (USD3.50 billion).

Imports from Europe and the US were valued at Ksh292.6 billion (USD2.88 billion), and Ksh85.9 billion (USD846.3 million) respectively last year.

READ ALSO:How Trump will beat China in Africa

Exports to china last year were valued at a paltry Ksh11.1 billion (USD 109.4 million) with the total exports to Asia closing at Ksh180.9 billion (USD1.78 billion).

“The increase in exports to Far East was largely due to significant improvement in exports to India, China, Thailand and Afghanistan,” KNBS notes in its survey.

According to the official government statistics, trade balance widened by 1.4 per cent to a deficit of Ksh1.147 trillion (USD11.30 billion) in 2018, from a deficit of Ksh1.131 trillion (USD 11.14 billion) in 2017.

“The growth of exports weakened in 2018 compared to the strong performance recorded in 2017, as increased uncertainties in the global trade led to constrained external demand,” KNBS Director General Zachary Mwangi noted during the release of the survey in Nairobi.

Kenya’s top exports include tea, horticulture, articles of apparel and clothing accessories, coffee, titanium ores and concentrates, collectively accounting for 62 per cent of the total domestic export earnings.

“The rise in exports was mainly as a result of increase in exports of horticultural products, while the slowdown in import growth was attributable to decline in imports of food due to favourable weather conditions as well as a reduction in the value of machinery and transport equipment imports,” Mwangi said.

The government has prioritized growth of the manufacturing sector, under the big four agenda, with a key focus on value addition on local produces, as it seeks to bridge the trade deficit and increase the sector’s contribution to the GDP.

“We have been implementing various initiatives to support manufacturers. This includes cutting by half the cost of electricity for industries,” National Treasury CS Henry Rotich said.

READ:Five ways Kenyan government bets will boost manufacturing sector

What Africa stand to gain from ACFTA

The African Continental Free Trade Area isn’t simply a ‘Free Trade Agreement’ it’s about establishing a unified continental market with 1.2 billion potential customers and where the private sector is a major engine to make it happen.

This, according to the East African Business Council (EABC) was the tone from the discussions of the meeting held on Thursday in Arusha about how the East African Private sector including Small and Medium Enterprises (SMEs) could benefit from the AfCFTA.

The one-day meeting, organized jointly between the EABC and the UN Economic Commission for Africa (ECA), convened close to 40 key players from the region’s private sector.

The office for Eastern Africa of ECA estimates large potential gains from the AfCFTA, including an increase in intra-African exports of Eastern Africa by nearly US$ 1 billion and job creation of 0.5 to 1.9 million.

“Together African economies have a collective GDP of 2.5 trillion USD, making it the 8th largest economy in the world. That makes the continent much more attractive to investment, both from within and from outside the continent”, said Andrew Mold, Acting Director of ECA in Eastern Africa. “This should encourage business people to take advantage of AfCFTA and make the investments necessary to sustain economic growth and create employment”.

Single continental market

According to data from the African Union, the objectives of the CFTA is to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Continental Customs Union and the African customs union.

The agreement is also expected to expand intra African trade through better harmonization and coordination of trade liberalization and facilitation regimes and instruments across RECs and across Africa in general as well as resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.

It is also expected to enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.

The 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia in January 2012, adopted a decision to establish a Continental Free Trade Area (CFTA) by an indicative date of 2017.

The Seven Clusters 

The Summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration.

The CFTA will bring together fifty-four African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion.

According to Nick Nesbitt, EABC’s Chairman it is important that the continent having a clear vision to put an end to the fragmentation of the internal market.

“I really applaud everybody who has involved in creating the AfCFTA because their vision is the one of pan-Africanism. It is something our founding founders aspired to. Our thanks to ECA for being at forefront of this conversation and pushing the agenda forward so that the continent becomes a single economic trading bloc”, he said.

Kenneth Bagamuhunda, Director General of Customs and Trade at the East African Community Secretariat, cited the experience of Regional Economic Communities as the building blocks for the AfCFTA. “The AfCFTA should build on what has already been achieved in regional negotiations like the Tripartite Free Trade Area, as well as within our respective regional blocks” he said.

Bagamuhunda highlighted governments need to set a conducive environment for the successful implementation of AfCFTA.

The AfCFTA was signed in March 2018, at a historic meeting of the African Union in Kigali. 52 of 55 African Union member states have so far signed the AfCFTA, 22 countries that have ratified the agreement, which was the minimum number required for it to enter into force.

According to a study by united nations conference on trade and development (UNCTAD), the CFTA must be ambitious in dismantling barriers and reducing costs to intra-African trade and in improving productivity and competitiveness.  Intraregional trade liberalization needs to be contextualized in a broader developmental framework that will provide benefits in terms of realizing Agenda 2063 of the African Union and the 2030 Agenda for Sustainable Development of the United Nations.

“Development-oriented regionalism can contribute to spearheading Africa’s achievement of development goals, the building of resilience to external financial and economic crises and the fostering of inclusive growth. It can have spillover benefits in terms of helping foster peace, security and political stability on the continent. UNCTAD, working in partnership with the African Union Commission, African States and other development partners, is committed to supporting the attainment of these objectives, embodied under the CFTA.” The study reads in part.

UNCTAD also notes that the CFTA may also mitigate costs associated with inaction in building an integrated market. The international trading environment within which Africa participates is changing rapidly with the proliferation of regional trade agreements and, in particular, mega-regional trade agreements, such as the recently concluded Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership and the Regional Comprehensive Economic Partnership. These arrangements may create spheres of trade centred on partner economies, and African countries face the risk that preferences and trade shares in these markets may erode.

According to an EABC brief on AfCFTA, one of the key steps beyond the ratification of the AfCFTA is to prepare and submit tariff offers, under modalities on goods that will determine tariff liberalization on goods to be undertaken between the AU Member States. Under AfCFTA, African Union Member States have agreed to remove at least 90 percent of tariff on goods imported from other State parties. This implies that under AfCFTA the coverage of products with zero-rated is not intended to be 100 per cent but rather 90 per cent with the remaining 10 per cent tariff classified as sensitive and exemption goods.

Currently is not very clear that 90 percent of tariffs refers to 90 percent of total tariff lines only or a combination of a minimum of 90 percent of total tariff lines and not less than 90 percent of the total value of imports.

In addition, there are uncertainties over the remaining 10 percent tariffs and how these are to be approached in relation to exempted and sensitive products, and how those tariffs are to be liberalized, whether partially or in full, and over what timeframes. Some quarters are proposing that of the remaining 10 percent: 7 percent are classified as sensitive goods with a lengthy phasing-in period, and 3 percent of goods to be exempted altogether. However, it is not known which products will be classified as sensitive and exempt. The most negotiating challenge is to determine which tariff lines will be classified as exempt and sensitive

Also Read: EABC means business when it comes to regional trade

 

Cyclone Kenneth: Mozambique evacuates, Malawi cautions citizens

South African Weather Service says that Cyclone Kenneth could bring intense rains to Mozambique until late Monday evening which could increase the risk of flooding.

At least three people have been confirmed dead in Comoros in the aftermath of Cyclone Kenneth which has made its landfall in Mozambique which is still recovering from aftershocks of Cyclone Idai.

Authorities in the East African island nation said on Thursday that Kenneth caused widespread power outages in the northern part of the main island, Grande Comore.

Other areas that were affected by the cyclone’s winds were the capital Moroni and the island of Anjouan.

Mozambique is recovering slightly over a month after Cyclone Idai flattened the port city of Beira through flooding.

The South African Weather Service says that Cyclone Kenneth could bring intense rains to Mozambique until late Monday evening. This could increase the risk of flooding.

Cyclone Kenneth is expected to bring heavy rains and flooding to north-eastern Mozambique, which was not hit by Cyclone Idai.

Preparedness for Cyclone Kenneth

Mozambique is on high alert and already compulsory evacuations have begun in the northern region of the country where Kenneth is expected to make landfall by early Friday.

The National Directorate of Water Resources has warned that the water basins of Rovuma, Messalo, Montepuëz, Megaruma and Lūrio may rapidly increase and overflow. The directorate has recommended that people living in areas at risk of flooding and landslides to move to safer and elevated areas.

If the water basins overflow, more than 70,000 people will be affected.

Relief Web reports that there is a moderate to high risk of floods and erosion in the cities of Pemba, Nacala Porto and Nacala-A-Velha, possibly affecting 10,000 people.

There are also concerns that the Chipembe dam could be affected.

Tanzania is also on high alert since increased rain is expected in Dar es Salaam, Tanga, Pemba, Lindi and Mtwara regions, the south coast of Tanzania and around Lake Victoria.

Will Cyclone Kenneth hit Kenya?

The Kenya Meteorological Department has dismissed as false claims that the cyclone would batter the Kenyan Coast.

“It is FALSE that cyclone Kenneth will hit the Kenyan Coast. By the laws of physics, Cyclones cannot come this close to the equator. Landfall will be northern Mozambique,” stated the department on Twitter.

The department warned that the country could, however, experience effects of the cyclone in the form of enhanced rainfall over parts of Isiolo, Western Kenya, Samburu and Nairobi.

A prolonged dry period has led to parts of the country suffering from drought but the rains in different parts of the country have brought some hope.

The department says that the rainy season will be shorter than normal adding that the current wet weather in some parts of the country will end in the second week of May.

Cyclone Kenneth in Malawi

In Malawi, the Government has issued a statement saying it expects enhanced rainfall throughout the country and in particular along the lakeshore.

The Department of Climate Change and Metrological Services says that the cyclone will make its landfall by the end of this week.

According to the Director at the department, Jolam Nkhokwe has cautioned those living along the lakeshore and flood-prone areas to follow weather forecasts since the cyclone will bring heavy rains and possible floods in some areas.

Reconstruction in Malawi after Cyclone Idai

Malawi: African Development Bank boosts cyclone response with emergency relief package and measures to combat climate change
The AfDB delegation to Malawi with Malawi Government officials. [Photo/AfDB]
Malawi’s recovery and reconstruction plans in the aftermath of Cyclone Idai have received a boost from the African Development Bank (AfDB).

AfDB is supporting the country with an emergency relief package and measures to combat the effect of climate change in the Southern African region.

The Bank’s Vice President for Corporate Services and Human Resources, Mateus Magala, led a delegation to Lilongwe this week to discuss the institution’s intervention plans with public and civil society officials in Malawi.

Magala met with government officials in Lilongwe, including the Minister of Finance, Economic Planning and Development Goodall E. Gondwe, his Homeland Security counterpart Nicholas Dausi and the Governor of the Reserve Bank of Malawi Dr Dalitso Kabambe.

AfDB has already availed USD250,0000 to Malawi, from its Emergency Relief Fund, for the purchase of emergency food items to avert hunger following the loss of crops damaged by the severe floods.

Assistance for Cyclone Idai survivors

AfDB’s Climate Fund will also release USD150,000 to Malawi to enable authorities to assist communities and internally displaced persons impacted by the cyclone.

The Bank’s long-term plans include designing and developing mechanisms for climate insurance and mitigating climate change.

Close to sixty people have died, and about 1 million persons across 15 districts displaced by the severe floods, mostly in the south of the country, where entire villages were submerged in water.

Private sector activities and operators in the land-locked nation of about 18 million people were also severely impaired by the cyclone.

You can also read AfDB pledging USD25 billion to mitigate climate change effects, Kenyan farmers receiving drought insurance pay-outs and how safe, controlled migration benefits African countries.

PEWIN CABS invests Ksh100 million in Kenya, rebrands to PTG Travel

It has invested Ksh100 million to grow its fleet

Pewin Cabs has officially rebranded to PTG Travel in a bid to increase its market share by offering diversified service in the Kenyan market.

The firm, which is now moving beyond cabs after 10 years, was among the first to launch its cab-hailing App in 2013, a move that contributed significantly to corporate transport solutions in Kenya.

Speaking at the launch of PTG Travel, Managing Director Justus Kirigua, said: “We are excited about the opportunities the new brand offers us.  The transition to PTG Travel is anchored on a three-year growth strategy which includes a Ksh100 million investment to grow our fleet and increase our services to include Bus services, VIP Services and Charter Flight.”

The sum invested translates USD986,232.

Mr. Kirigua has since assured the existing customers that even with the identity change, the firm will continue to deliver greater convenience to clients.

“To help our clients manage their logistics costs, we have enhanced our APP for increased transparency and accountability,” Kirigua said.

Nairobi County Roads, Transport and Infrastructure Executive Hitan Majevdia who graced the event said:”We are proud of PTGs strategy to innovate the transport sector in Kenya. Services like corporate transport sharing and Air Charter will greatly enhance road safety and ease congestion on our roads.”

PTG Travel is eying to enter two East African countries using its current corporate client franchise model in the near future, Kirigua said , as the company seeks to transform corporate transport landscape in Africa.

The move to rebrand comes at a time when tourism numbers continue to improve in the country thus increasing demand for tourism travel.

Last year, number of international arrivals hit 2, 025, 206 compared to 1, 474, 671 in 2017, an increase of 37.33 per cent.

Moreover, foreign companies continue to show interest in setting up shop in the country due to the continued government’s efforts in improving ease of doing business in the country.

Last year, over 20 new UK companies announced plans to set up in Kenya during UK Prime Minister Theresa May visit in the Country.

Speaking about the opportunity to give back to the community, Mr. Kirigua concluded:”There are different modes of transport, and majority of people in our country actually walk to their places of work. We need to improve the walk paths, and make provision for bike lanes. This is something PTG would love to do as part of CSR for the industry.”

ALSO READ:Investing in Kenya’s logistics space

Investing in Kenya’s logistics space

Delivery has become the in-thing in the market. Customers nowadays don’t have to go to the shops but can just order, make a payment (either before or on delivery) and receive their orders at home, in the office or have them delivered wherever they want. The Exchange spoke to Glovo, a startup founded in 2015 in Barcelona, and launched in Kenya in February this year. The service is present in over 20 countries and more than 100 cities. With over 10 years in business development, seven of which have been in the tech world, Glovo Market Lead (Sub-Saharan Africa) Priscila Muhiu divulges into the logistics business in Kenya and the region.

 

What makes the logistics space in Kenya an attractive prospect and why is Glovo in this business?

Logistics is the key driver to any economy. Without logistics, businesses will not be able to get their goods to their consumers. Logistics powers economic growth and can unlock the potential of businesses. At Glovo, we believe that users should have access to their own city immediately and with ease by bridging the gap between consumers and the local economy. Consumers can use Glovo to get anything delivered to them in minutes while at the same time, businesses have access to thousands of customers who use the Glovo app. A report by the World Bank indicated that logistics costs account for over 30% of the total cost of goods. To lower these costs, increasing efficiency is paramount. Leveraging on technology can help organizations to increase efficiency and lower the costs of goods

With the recent negative coverage around the local bodaboda industry, along the lines of national security, what do you do to ensure that you enlist riders with clean criminal records?

Our riders go through a vetting process to ensure that they have no criminal record. We then get them trained on customer service and etiquette to ensure good customer experience. We also have a rating system that enables users to give us feedback on the riders ́ behaviour.

Being a multi-category delivery app has required you to get into partnerships with relatively unknown local brands. What does this model mean for both parties involved?

The partnership creates a win-win situation. The Brands get access to thousands of users that come to the app hence increasing their sales and lowering their marketing costs. In return, Glovo earns a commission by connecting it´s users to the local brands hence increasing the company revenue

Based on your experience in the market so far, what would you say are the challenges of doing business in the region?

The logistics infrastructure in Kenya is still not up to the global standard, though it is improving. The increasing cost of fuel poses a challenge and by extension increases the cost of transporting goods. Also the lack of proper address systems also creates friction in the delivery of goods. The delivery service providers are forced to make a couple of calls before getting to the destination. However, this has greatly improved over time

What makes you so sure that you will succeed within this market?

Our unique value proposition is that we are a multi category platform hence use cases are many. Users can get anything from food, groceries to drinks delivered to them in minutes. Users dont need to have separate apps for food, groceries or courier. They just need to download one app, Glovo, and they will experience convenience at its best.

What is your view on the current operating environment in the industry in Kenya?

The current operating environment is conducive for business growth. However, the cost of branding a bike is very high and doesn’t ́t make economic sense to the delivery companies. The key players in the industry are currently trying to lobby with the county government to lower the costs.

How do you plan to deal with competition from other logistics service providers within the local space?

Our focus is on our consumers and we seek to constantly meet the consumer needs. We believe that with our unique value proposition and exception customer experience, we can stand out from the competition.

Going forward what role are you going to play in the local logistics industry?

Glovo seeks to make everything available by connecting Kenyans with their local economy. To enable this, Glovo relies on two main pillars;

  1. a) Partnering with a wide variety of establishments including; top fast food restaurants, local food restaurants, Groceries, bakeries and gift shops
  2. b) bike riders, who are trained to provide efficient delivery service in minutes.

The economic impact expected from this is that riders will increase their earnings and get to service more orders. At the same time, businesses will have access to more customers and hence increase their sales. The overall impact will be local economy growth and access to opportunities.

 

Sub-Saharan Africa economic growth stuck below 3 percent

Sub-Saharan Africa’s economic growth slowed to 2.3 per cent in 2018 from 2.5 per cent in 2017, remaining below population growth for the fourth consecutive year, the World Bank has said.

In the April 2019 issue of Africa’s Pulse, its bi-annual analysis of the state of African economies published on Monday, the bank said regional growth was expected to recover to 2.8 per cent in 2019, staying below three per cent as it has been since 2015.

The slow growth reflects ongoing global uncertainty but increasingly comes from domestic macroeconomic instability including poorly managed debt, inflation, and deficits; political and regulatory uncertainty; and fragility that is having visible negative impacts on some African economies.

It also belies stronger performance in several smaller economies that continue to grow steadily, the bank said.

It noted that Nigeria’s growth rose to 1.9 per cent in 2018 from 0.8 per cent in 2017, reflecting a modest pick-up in the non-oil economy. South Africa came out of recession in the third quarter of 2018, but growth was subdued at 0.8 per cent over the year, as policy uncertainty held back investment.

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East Africa’s economic growth outperforming African peers – The Exchange

Angola, the region’s third-largest economy, remained in recession, with growth falling sharply as oil production stayed weak.

World Bank chief economist for Africa Albert Zeufack said the digital transformation could increase growth by nearly two percentage points per year and reduce poverty by nearly one percentage point per year in sub-Saharan Africa.

 This is a game-changer for Africa,” Zeufack said.

The World Bank said fragility in a handful of countries was costing sub-Saharan Africa over half a percentage point of growth per year.

“The drivers of fragility have evolved over time, and so too must the solutions,” said Cesar Calderon, lead economist and lead author of the report.

“Countries have a real opportunity to move from fragility to opportunity by cooperating across borders to tackle instability, violence, and climate change.”

South African business delegation arrives in Brazil

The South African business delegation has arrived in Brazil to participate at the 12th Latin American Defence and Security Exhibition (LAAD).

The exhibition which opened on Tuesday in Rio de Janeiro, Brazil, will end on Friday, 5 April.

LAAD is a leading Latin America Defence and Security event that gathers international and national companies that provide technologies, equipment and services for armed forces, special forces, police, homeland security and security managers from large companies, service concessionaires and critical infrastructure.

Companies exhibiting in the South African Pavilion have been assisted by the Department of Trade and Industry (the dti) through the Export Market Investment Assistance Scheme (EMIA), which aims to increase exports of South African manufactured products.

The dti said South Africa’s offerings comprise of textiles, body armour manufacturers, radar and communication systems, search and rescue boats and small to medium range arms.

The South African Consul-General in Brazil, Malose Mogale commended the efforts undertaken by the dti in bringing this diverse crop of companies in the South American region and emphasised the strategic importance of Brazil to South Africa.

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“Brazil remains a strategic partner for us in this region and the LAAD platforms offer us potential opportunities not only in this country but within The Mercado Comun del Sur or the Southern Common Market economic and commercial group, which Brazil is a member of,” said Mogale.

He said companies looking to explore Brazil should not neglect the important aspect of conducting due diligence on firms they are looking to explore partnerships or transactions with.

“As the mission, our primary aim is to urge South African companies to guard against compromising their intellectual property,” said Mogale.

“We have noticed that this is one aspect of conducting business that is generally neglected and we request that they approach the mission to confirm the authenticity of companies they are engaging with as we have a database of companies that we update regularly.

“Also, our companies must ensure that a certain aspect of their production remains local as that will be beneficial to creating jobs and growing the economy of the country,” he said.

Meanwhile, the South African chapter of the BRICS Business Council began hosting the group’s mid-term meeting in Johannesburg on Tuesday. The meeting which ends Wednesday will also mark the handing over of the rotating chair of the Council to Brazil.

The two-day meeting is being held under the theme “BRICS in Africa: Collaboration for Inclusive Growth and Shared Prosperity in the 4th Industrial Revolution”.

About 300 delegates, government leaders from the BRICS member countries, including the economic bloc’s captains of industry and domestic and international opinion makers are attending the meeting.

South Africa backs Namibia against dumping chicken from Brazil

The South African Poultry Association (SAPA) said on Tuesday that it had noted with alarm that the insidious dumping of chicken from Brazil that plagues the local industry has also taken root in Namibia.

Izaak Breitenbach, general manager of SAPA’s broiler division, said that it was increasingly clear that Southern Africa was now in the crosshairs of exporters looking for markets for the unwanted leg quarters that are the byproducts of their lucrative breast-meat exports to the US and Europe.

Breitenbach said that given similar experiences with the effects of chicken dumping in West Africa, it may be necessary for Africa to stand together to fight to dump from big market players.

After historically being a net importer of chicken, Namibia was encouraged by the increase in demand for poultry to invest in developing a home-grown chicken industry, following a pattern that saw local chicken industries in other African countries all but wiped out by dumped imports.

“Our neighbours to the north have a small chicken industry compared to ours and is even more vulnerable to the devastating effects of uncontrolled dumping, which poses serious risks even to a robust industry,” Breitenbach said.

“As the South African experience proves, job losses are soon to follow, but what is worse is that the investment in a new industry that Namibia embarked on only six years ago, might bear no more than stunted fruit once this predatory trade practice wipes out any possibility of industry expansion and development.

“We believe that the time has come for Southern African countries to stand together against this onslaught from Brazil, which is one of the biggest exporters of chicken in the world, and which targets this region with bulk exports of unwanted brown meat.”

Breitenbach said the Namibian industry is calling for drastic action, and they have the full support of the SA Poultry Association.

“Our members have already joined other producers in the Southern African Customs Union (SACU) in making an application to the International Trade Administration Commission for an 82 per cent import tariff imposed on Brazil, among a number of other countries,” Breitenbach said.

“Already, once thriving chicken industries in other African countries have bitten the dust. The experience in Namibia proves that Brazil is now targeting multiple markets with identical formats and prices, and this intentional predation needs to be addressed as a matter of urgency.”