Kenya Freight Transport Report 2007

Despite a congestion problem caused by the temporary suspension of underwriting by local insurance companies, prospects for Mombasa port, run by the Kenya Ports Authority (KPA), remain good. KPA chief executive Abdallah Mwaruwa has attributed gains to strong growth in regional economies and improvements in service delivery since the introduction of new port equipment and better operational planning. He has said that the KPA is determined to improve its performance in line with the contract signed with the government in which it was expected to handle 13.7mn tonnes in 2006 and earn KES3.7bn (US$50mn) in profits. In fact, we are optimistic that KPA can continue its recovery from years of debt, under-investment and congestion. In our latest Kenya Freight Transport Report, BMI concludes that maritime freight volume is set to accelerate further to expand by an annual average of 8.1% in the 2007-2011 forecast period.

Various factors support this prediction. We now expect average GDP growth of 4.3% a year over the next five years, which will underpin demand for freight. International trade will grow at a higher 9.4% rate over the same period. Kenya's ports are of course an important conduit for freight transit to neighbouring East African countries, and this too will boost demand. A further factor is the likely improvement of hinterland transport links, particularly now that the combined concessioning of the Kenyan and Ugandan railway companies to the Rift Valley Railways (RVR) consortium has been completed.

Prospects are also encouraging for recovery in wider freight business. Road freight will continue to be the favoured mode of land transport. We are predicting that annual volume will grow by an average of 5.9% in the 2007-2011 period. Rail freight, plagued by under-investment, has contracted, and it will take some time after the completion of the concessioning process before any kind of strong recovery is likely. We are forecasting average annual growth of 4.0% in tonnage. Air freight is likely to perform dynamically with expected annual growth of 13.7%. In the overall Middle East and Africa (MEA) business environment matrix, Kenya currently ranks second from the bottom, just above Egypt. Kenya records below average scores in a number of categories including political and economic risk and in its development and support of infrastructure. However, Kenya manages to score close to the regional average in terms of its regulatory and competitive environments, largely because it has made some progress in adopting air safety standards and has been forced to seek private sector involvement in key transport sub-sectors, particularly air shipments.

For the 2007-2011 forecast period, we expect Kenya's transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 4.8% in value terms, versus 4.3% for overall GDP. The total value of transport and communications GDP will rise to US$3.19bn in nominal terms by 2011, representing 8.1% of Kenya's GDP. The transport and communications sector employed 94,000 people, or 5.0% of the labour force, last year. We see that figure rising to 104,000 by 2011, while remaining proportionately constant at 5% of the total.