A section of stakeholders in the import and export sector have raised concerns about logistical challenges currently affecting business across the Kenyan market.
Players in the fresh produce market cited a couple of air and sea freight issues hindering the export of horticultural produce leading to significant losses.
According to the Kenya Economic Survey 2022, the horticulture sub-sector currently contributes an estimated 13% of Kenya’s GDP, 24.8% of the total domestic exports, 40 % to the agricultural GDP and employs 50% of the agricultural labour force with an estimated 10 million Kenyans largely deriving their livelihoods from the sector.
Additional 2024 statistics from the Agriculture and Food Authority (AFA) Horticultural Crops Directorate (HCD) show that the total value of horticultural produce exported increased from Sh 147.08 billion in 2022 to Sh 156.69 billion in 2023.
This represents a 7% increase attributed to an increase in volumes exported by 76,931.27 metric tonnes.
During the period under review, the value of flower exports decreased by Sh 30.4 billion from Sh 103.8 billion in 2022 to Sh 73.5 billion.
In addition, the value of vegetable exports rose 115.5% from Sh 23.59 billion in 2022 to Sh 50.86 billion.
The value of fruit exports increased by 64.9% from sh 19.63 billion in 2022 to Sh 32.37 billion in 2023.
In 2022, flower exports accounted for 47% of the total horticultural export values while vegetables and fruits accounted for 32.5% and 21% of the total value respectively.
Speaking in a panel discussion during the Kenya Fresh Produce Conference and Exhibition 2024 held in Nairobi, Shippers Council of Eastern Africa (SCEA) CEO Agayo Ogambi noted that as a country, there is a need to enhance our logistics.
This, he said, is cognisant of the market demands, in terms of carbon emission, delivery time and predictability.
“In this region, one of the biggest challenges we face is reliability and predictability,” Ogambi said.
Some of the fresh produce challenges that were highlighted during the event include poor road networks especially the first-mile connectivity, and duplication of roles among intervening agencies such as KEPHIS, and HCD.
Others included the ever-increasing CESS charged by the Horticultural Crops directorate, based on Free On Board (FOB) value which was previously on weight where the rate is too high to sustain and inadequate cold storage rooms including consolidation centres.
Ogambi said the government needs to be cognisant of the need to support exports by either reducing or harmonising the interveners.
“There is also the issue of limited funds which calls on the private sector to continuously engage the government on the need to lower charges. At the county government level it is even worse because there are the sales and roadblocks and they do not know how to manage those costs,” he added.
Lengthy export processes as a result of too many regulations were also listed as a challenge as well as multiple licence requirements, delayed inspections by government agencies and all regulatory bodies charging for the services they offer.
Others also included arbitral fees and charges on exports, challenges in claiming return on VAT, high freight, handling costs and inland costs as well as emerging issues including the Red Sea crisis which today leads to increased transit times and costs.
On air freight, some of the challenges that were highlighted included high freight costs which is now $3.5 per kg, inadequate airspace during the peak seasons, limited redirect flights thus making technical stops, exorbitant exchange rates charges and shed storage/ handling rates and frequent rotation of KRA officers.
On his part, Hub Imports and Exports Ltd Director Patrick Mwangi said on the quality of trade and transport-related infrastructure, at JKIA, Kenya’s trade quality with other regions is still not yet there as the country still faces quite a lot of competition adding that there is need to improve.
He, however, said most of the processes at the airport are online based which is a very good improvement and commendable.
“Despite these efforts, we still encounter challenges, for example, when we have system downtimes and we have to wait for approvals,” Mwangi said.
“Sometimes during peak seasons like Valentine’s day, as we deal with fresh cut flower exports, we have to wait even up till the middle of the night. I hope we will have backup systems that will help address this.”
On the efficiency of the clearing process, Mwangi questioned how fast it takes one to clear cargo at JKIA as well as how efficient the process is adding that most exporters have lately been facing unfortunate challenges where they get surprising new levies every day.
This, he said, among other issues, makes the cost of doing business in the country very unfavourable.
He further noted that one other major challenge that they face as exporters is the ease of arranging competitively priced shipments.
“A few years ago we used to have cargo flights such as KQ but today, where are they?,” Mwangi continued.
“We have seen a big challenge where we have to use aircrafts such as Ethiopian Airlines who charge three times the normal rate because they are giving a competitive advantage to their produce in Ethiopia.”
“If you use Ethiopian Airlines, you will understand that you will pay $3.5 per kilo while they charge their own produce $0.8 per kilo. Can our government help subsidise the costs of shipping our produce? We are losing money every single day.”
On sea freight, some of the challenges that were highlighted included high freight costs, and high transit times exacerbated by the Red Sea crisis increasing the transit time to an average of 40-45 days, with extremes of over 50 days.
Others include high plug-in charges of $3 per hour, surcharges, for example, Maersk reefer surcharge of $200 (Sh25,794), delays in gating in especially when KPA or KRA systems are down and scanners breakdown or are down as well as implementation of the Integrated Customs Management System (iCMS) system downtime leading to delay in generation of the MS levy slip.
Others are the Kilindini Waterfront Automated Terminal Operation System (KWATOS) system downtimes leading to container clearance delays and inspection delays due to inadequate staff.
Fawakih Imports and Exports Ltd MD Hassan El’miqdad called for collaboration with shipping lines to ensure a win-win relationship.
“As exporters, I believe we are the ones who lose the money when it comes to our profits as shipping lines make their money and we make losses,” he said.
He also called on governmental support adding that sometimes, exporters wonder if the government is working with them, for them or against them.
“Instead of getting support, it seems like the government is trying to finish us,” El’miqdad said.
“The exporter is always at risk. We have the levies and challenges with KEBS who are also bringing in a levy of 0.2% of FOB value. There is also KenTrade, E-Citizen, Corporate task, and even E-Tims. Sometimes we are left confused whether the government is set out to work with us.
He further said that even if air freight can be the best transport network to use, it is still, however, expensive.
“This is in the sense that as an exporter you can use sh 1 million to get sh 15,000 which is not mathematically right and you end up giving the airline $7,000. We are then compelled to send goods by sea. We need to make air freight more appealing as compared to sea freight,” he added.
El’miqdad further said that Kenya is disadvantaged as compared to its neighbours when it comes to shipping to Rotterdam, Netherlands which results in the country’s exported fruits arriving in a very bad state.
“For instance, harvesting takes three days, since we are in off-season it can take another 6-7 days to pack in a container, you get 40 days on transit, again, a week in the port, and then another week to the porting destination. That is almost 2-3 months in a year for just one container to arrive. Do you expect the goods to be in good quality when they arrive?”
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