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The World Bank’s latest Doing Business Report reveals improved rankings for many countries in the East African Community (EAC), such as Rwanda and Kenya, climbing up 15 and 12 places, respectively, from last year. This development has had a positive impact on the East African container trade market, which continued to see improvements in both imports and exports. PHOTOS - MAERSK EAST AFRICA

Diversification remains key driver to expand trade in East Africa

The World Bank’s latest Doing Business Report reveals improved rankings for many countries in the East African Community (EAC), such as Rwanda and Kenya, climbing up 15 and 12 places, respectively, from last year.

This development has had a positive impact on the East African container trade market, which continued to see improvements in both imports and exports.
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Mads Skov-Hansen, Managing Director at Maersk Line Eastern Africa says that the container trade growth experienced over the third quarter of 2017, however, has been limited by the political uncertainty that surrounded the recent elections in Eastern Africa’s economic hub.

Despite that fact, the East African import market has strengthened during the third quarter, particularly in the Central Corridor, which was up seven-teen per cent from the previous quarter, resulting in three per cent year-on-year growth.

The Northern Corridor, on the other hand, was up six per cent from the previous quarter, and exhibited six per cent year-on-year growth.

The World Bank’s latest Doing Business Report reveals im-proved rankings for many countries in the East African Commu-nity (EAC), such as Rwanda and Kenya, climbing up 15 and 12 places, respectively, from last year.

This development has had a positive impact on the East African container trade market, which continued to see improve-ments in both imports and exports.

Mads Skov-Hansen, Managing Director at Maersk Line Eastern Africa – a member of A.P. Moller-Maersk – says that the container trade growth experienced over the third quarter of 2017, however, has been limited by the political uncertainty that surrounded the recent elections in Eastern Africa’s economic hub, Kenya, which spilled over into other key countries served by the Northern Corridor, such as Uganda.

  Mads Skov-Hansen Managing Director at Maersk Line Eastern Africa | Coastweek

"We at Maersk have a positive outlook for the Kenyan economy in terms of continued growth." says Mads Skov-Hansen Managing Director at Maersk Line Eastern Africa.
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Despite these political influences, the A.P. Moller-Maersk 2017 Third Quarter East Africa Trade Reportreveals an improve-ment in aggregate trade levels over the last quarter, resulting in overall year-on-year growth of three per cent for the region.

"It’s always difficult to analyse a specific period during an election year.

"We typically see significant trends play out which may mean that the results captured are not actually a true indicator of real growth experienced," says Skov-Hansen.

IMPORT GROWTH DRIVEN BY CARS AND TEXTILES: These trends are particularly relevant to note with regards to imports.

"During an election year, imports tend to see a boost just before the election day, as people tend to stock up on basic commodities.

"There is then usually a drop in imports immediately after, as people hold back on spending, opting rather to hold on to the liquidity in the face of political unrest and economic uncertainty," explains Skov-Hansen.

Despite that fact, the East African import market has strengthened during the third quarter, particularly in the Central Corridor, which was up seventeen per cent from the previous quarter, resulting in three per cent year-on-year growth.

The Northern Corridor, on the other hand, was up six per cent from the previous quarter, and exhibited six per cent year-on-year growth.

The main drivers to this in-creased import market were consolidated cargo, used clothing and foodstuff in the Central Corridor, while the Northern Corridor saw an increase in import of textiles and synthetic resin -sourced mostly from Saudi Arabia and used as raw material components in different indus-tries, from the manufacture of plastics to adhesives.

EXPORTS SEE COMMODITY UPRISING: Whilst this market continues to be largely agricul-ture-based –dominated by tea, coffee and avocados in the Northern Corridor; and animal fodder, seeds and tobacco in the Central Corridor – during the third quarter of 2017, commodi-ties and minerals have also played a prominent role in export growth, with copper – used in the construction of electronics in China, India, UAE and South Korea – and soda ash – exported mainly to India and Thailand for the manufacture of glass –contributing significantly to exports in the Central Corridor and Northern Corridor respec-tively.

"While the Northern Corridor’s exports were still down by five per cent year-to-date as a result of the drought earlier on in the year which negatively impacted tea exports from Kenya, the Central Corridor bounced back to break even in terms of year-to-date export movements," explains Skov-Hansen.

"Kenya and Uganda are actually the key export locations, seeing two per cent year-on-year export growth, when compared to quarter three of last year, while the Central Corridor experienced three per cent year-on-year export growth."

REEFER PERSPECTIVE: For Kenya’s avocado exporters, the inception of controlled atmosphere containers has created a fundamental change.

Before the new technologies were available, the Middle East had been as far as the exporters could reach in containers.

Now, Europe, where the fruit sells for roughly triple the price, is within reach.

Towards the end of 2016 and the beginning of 2017 Kenya experienced a prolonged dry spell which negatively affected the avocado trees which flower within this period.

This resulted in a depressed harvest com-pared to the 2015/2016 season.

Looking forward, the outlook for 2017/ 2018 is looking good due to the current rains.

Kenya produces an estimated 115,000 metric tons of avocado annually, seventy per cent of which is grown by small-scale farmers.

Some years back, most of the avocados were sold in local markets, but now about three quarters of the avocado fruit grown is exported.

LOOKING FORWARD TO A BRIGHTER FUTURE: With election period having come to a close on 28 November, container trade is set to see further improvements moving forward.

Skov-Hansen says, "For the Northern Corridor, the political situation limited the growth of markets this quarter, but subject to stability, we at Maersk have a positive outlook for the Kenyan economy in terms of continued growth."

Similarly, the outlook for the Central Corridor is positive, driven by positive sentiment around Rwanda, Uganda and Tanzania.

ABOUT A.P. MOLLER-MAERSK: A.P. Moller -Maersk is a global leader in container shipping and ports. Including a stand-alone Energy division, A.P. Moller -Maersk employs roughly 88.000 employees across operations in 130 countries.

Maersk Line is the world’s larg-est container shipping company which services customers through 324 offices in 115 countries.

It is known for reliable, flexible and eco-efficient services.

Globally Maersk Line employs 7,600 seafarers and 23,200 land-based employees and operate 590 container vessels.

The Kenyan office was established in 1994, with the head office situated in Nairobi and branch office in Mombasa.

The other offices under Eastern Africa region are in Dar es Salaam, Zanzibar, Tanga, Kampala, Kigali, Addis Abba, Khartoum and Port Sudan.
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FURTHER READING:

Diversification still key driver to expand trade in East Africa - PDF

           

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