Press Center | Freight Shipping Logistics News

In a span of five days President Kenyatta has inaugurated two major infrastructure projects that are expected to cement Kenya’s position as a regional commercial hub, opening new opportunities for the logistics and transport companies.
In a span of five days President Kenyatta has inaugurated two major infrastructure projects that are expected to cement Kenya’s position as a regional commercial hub, opening new opportunities for the logistics and transport companies.

The investment in a Sh1.2 trillion standard gauge rail (SGR) and a Sh55 billion new airport terminal at Jomo Kenyatta International Airport (JKIA), combined with other infrastructure projects is expected to cut the cost of transporting goods, increase efficiencies and supporting business.

Siginon Group, one of Kenya’s leading logistics companies, sees all these investments as an opportunity to grow, especially with the recent discovery of mineral resources in Kenya and neighbouring countries.

Like many other private sector players, Siginon is positioning itself for the emerging opportunities with own Sh850 million investment in supporting infrastructure — a new air cargo terminal at JKIA and Sh300 million in its container depot in Mombasa.

The Business Daily caught up with the company’s managing director Meshack Kipturgo, 44, a day after the launch of the SGR in his Nairobi office for an interview on the emerging realities in logistics industry.

What do these big government investments in infrastructure mean for your business and industry as a whole?

It promises immense opportunities for importers and exporters and could bring in new efficiencies that drive overall economic growth.

Your company and your competitors move large amounts of cargo by road. Do you see the Standard Gauge Railway as a threat or opportunity?

About 96 per cent of cargo out of the port moves by road and only four per cent is on the rail. Today, the rail is neither efficient nor cost-effective and for that reason we are not supporting it the way we would like to.

Ideally there is heavy cargo that should traditionally be moved by rail. When the railway ultimately becomes efficient we will definitely support it by transporting our cargo on it.

We are excited by the new investment in a standard gauge rail. As a logistics company, our interest is in offering our customers the best solutions to their logistics needs.

Once the new railway line is ready, cost effective and more efficient than the road, we will take cargo from the road to rail.  It is not really about us but about the customer and we are in a position to offer all options.

In the pie that makes up Siginon group, which division takes up the largest share?

Global logistics accounts for 60 per cent of the business. Container and freight station as well as aviation take 20 per cent each.

What segment of the business is growing the fastest and what is driving it?

Global logistics. I think that the discovery of oil in Kenya is going to change the logistics industry significantly. We expect a boom in terms of cargo movement in the next five or so years.

I am excited at the prospects of the industry having a lot more cargo to handle in Kenya and the greater East Africa because of the oil discoveries in Kenya, Uganda, South Sudan and even Mozambique. Tanzania has gas, so global logistics will continue being the fastest growing division of our business.

Globally, cargo movement is down, looking at IATA statistics, have you felt this?

Yes, we have felt it. Actually the aviation industry has been down for some time. The good news is that those same IATA numbers show that things are starting to pick up. Kenyan operators are lucky because there is lot of cargo coming out of Nairobi to the rest of the world.

Most of the flights leaving Nairobi are going with these perishables but there is not enough return loads, southbound cargo. The solution to this challenge is to have an airport free trade zone at JKIA.

Flights can come with cargo for purposes of redistribution in the region. That will help the airlines to have sustainable business.

How has the introduction of the Rail Development Levy (RDL) impacted your business and what are your thoughts about it?

The introduction of this levy actually caught us, especially our customers, off guard. I wish we had been given notice. It affected the clearing process adversely.

For the first time, customers who thought they were entitled to duty-free status were forced to pay the levy, causing a standoff between them and government for months and stalling the movement of our tracks.

The good thing is that things have now normalised and cargo movement is back to normalcy.

The port has remained a constant headache for your industry; what are the challenges?

It seems there is political will to address the challenges at the port and this will sort out the issues. It would certainly help if government departments work more closely to clear cargo faster.

It takes about three to four days to clear cargo, which is a good improvement but ideally it should take 24 hours. The cost of inefficiency is very high.

Let’s start with the vessel. Keeping one vessel at the port for three days costs between $20,000 and $40,000 (Sh1.72 million to Sh3.44 million). This is all loaded onto the cost of goods it carries, making the cost of inefficiency very high.

An efficient port increases our country’s competitiveness, more money for customers and more business for us.

What does the new port terminal mean for you and the industry as a whole?

This should be very good for us and the region. It means Kenya will have the capacity to handle more transhipment cargo, which combined with standard gauge rail should see the country through the next five years.

How is business in South Sudan? We have seen companies unable to repatriate money to Kenya, have you been affected?

Yes. We actually made huge investments in South Sudan in the past but have had to slow down. We only transport goods to that country if we are paid upfront in Kenya. We do not offer credit facilities to South Sudanese clients because of uncertainty with the payment. They have to pay upfront unless the client is Kenyan or a transnational company.

As the year comes to a close, how has the business been and what does 2014 look like?

Business was quite slow in the beginning but it has since picked up and we are closing the year profitably, which is quite good.  I’m quite optimistic about 2014 because it’s not an election year.

Every election year we see a dip as our customers sit and wait. The new government is stabilising so it should be rational to expect good business. We remain excited by the new developments aimed at improving efficiency on the northern transport corridor.

I think there is political good will throughout East Africa to make the northern corridor more efficient and that is good for the logistic industry.