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Kenya Freight Transport Report 2011
Business Monitor International, Jan 2011, Pages: 38
The Kenya Freight Transport Report provides industry professionals and strategists, corporate analysts, freight transportation associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kenya's freight transportation industry.
The launch of the common market for the East African Community (EAC) in July 2010 has been generally thought of by BMI as a good move for industry and the economy alike. However, an infrastructure deficit has been pointed to frequently as one major obstacle to the benefits of the common market. The EAC, which includes Kenya, Tanzania, Uganda, Burundi and Rwanda, has a severe transport infrastructure deficit. In the World Economic Forum's Global Competitiveness Report, four of the five countries rank 90 or below (out of 133) for overall competitiveness of infrastructure, and one (Rwanda) does not appear.
Congestion at ports, aging rail infrastructure, and damaged and congested roads, present a major impediment to the benefits of doing away with border tariffs. The added cost of transporting goods in the region is still a major hindrance to the business environment and economy, and one that a common union will not alleviate. However, news that the EAC is looking to tackle the infrastructure deficit is emerging.
According to the deputy secretary general for infrastructure and planning, the EAC needs to raise up to US$25bn to upgrade its railways over the next 10 years. The existing rail network in the region leaves much to be desired. Neither Rwanda nor Burundi has rail networks in place. Although there are rail links between Kenya, Uganda and Tanzania, the track has fallen into a state of disrepair, with limited capacity and very slow movement.
As a result, the majority of freight in the region is carried via road, which in turn has led to a degradation of road quality. Currently, no more than 15% of cargo from Kenya's Port of Mombasa is carried west via railways. Accompanying the railway master plan is the roads master plan, which identifies five strategic corridors within the EAC with a combined length of 12,000km that need to be rehabilitated and upgraded in order to improve road links within the community.
Kenya's economic outlook is beginning to look encouraging as the country continues to emerge from the difficult years of 2008 and 2009, marked by a 'tripple whammy' of post-election riots, agricultural drought, and then the full force of the global economic recession in 2009. Although the dangers of a return to tribal tensions remain, political institutions are looking more solid and BMI sees approval of a new constitution in a referendum in August 2010 as a positive development, encouraging decentralisation of political power and accountability.
On the economic front we see healthy growth based on expansion of the domestic consumer market, the construction sector, and the expansion of infrastructure and housing. As a result of our analysis, BMI estimates 2010 GDP growth of 4.2% in Kenya (following on from 2.5% during the previous year, dominated by the global recession). Our outlook for 2011 is for the recovery to gain pace despite a 'double dip' slowdown across the industrialised economies, with Kenyan growth moving up to 5.4%, and then quickening further to 5.7% in 2012. In the five years to 2015, we expect growth to average 5.5% per annum, implying Kenya will be one of the better performers in Sub-Saharan Africa.
Over the last decade, Kenyan air cargo volume has been rising rapidly, in most years at double-digit percentage rates. The global recession of 2009 had a significant impact, however, with growth that year dropping to only 1.5%. We saw a recovery in 2010 (estimated growth of 9.3%) that we forecast will gain vigour going into 2011, achieving growth of 11.8% to 502,900 tonnes.
Against the background of a weak recovery in global trade, Kenya's main bulk port at Mombasa will see tonnage growth of 6.1% in 2011 to reach a total of 21.800mn tonnes. This comes after growth of 7.8% in 2010. Mombasa is also Kenya's biggest container port.
In terms of cargo volume, Kenya's railway system experienced a standstill year in 2009 (with growth of 0.1%). We estimate a similar year in 2010 with growth of 0.9%. For 2011, we expect growth to inch up marginally, with volume growing by 1.2% to 2.192mn tonnes. While a revival of the rail sector can be expected in Kenya, it requires investment over a number of years, and results in terms of greater tonnage hauled will not be seen until after 2015.
In real terms Kenyan trade slumped by 3.2% in 2009, had a recovery in 2010 (estimated growth of 2.2%) and is set to gain a little more pace in 2011 (+3.8%). In nominal terms we are expecting imports to total US$14.3mn in 2011, with exports trailing significantly behind at US$9.47bn. Kenya will therefore continue to register its habitual small trade deficit. In the period to 2015 average import growth in real terms will be 3.0% per annum, with exports growing at the higher rate of 3.3%.
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