BizNis Africa
Latest News
Microsoft – How to thrive in the digital era
Forget about digital transformation until you have addresses how...
South African Reserve Bank Repo Rate remains at 6.75%
The Reserve Bank on 23 November 2017 kept the...
Adapt IT acquires LGR Telecommunications
JSE-listed Adapt IT Holdings Limited on 22 November 2017, ...
Africa must implement 1999 Yamoussoukro agreement for open skies
The African Development Bank (AfDB) has called on African...
LCB Bank and Mastercard transforms financial economy in Republic of Congo
LCB Bank, a subsidiary of BMCE Bank Of Africa...
Makro acquires majority stake in start-up company WumDrop
Makro has acquired a majority stake in last mile...
Sasol signs $3.9 billion revolving credit facility
Sasol, the South African chemicals and energy company, has...
Dangote Cement focuses on industrial revolution across Africa
Dangote Cement Plc, one of Africa’s largest cement company,...
Metrofile Holdings launches new digital company
Metrofile Holdings today, 23 November 2017, announced the formation of...
Expats choose South Africa for adventure and quality of life
Globally mobile individuals, also known as expatriates or ‘expats’,...

Overall East Africa containerised trade volumes experienced 1% growth in the first quarter of 2017

In line with what was reported last year, there continues to be a noticeable disparity in performance between the two core trade corridors of East Africa. Container trade in the Northern Corridor, which serves Kenya, Uganda, South Sudan and parts of Rwanda, expanded by 1%, whereas the Central Corridor, serving Tanzania, parts of Rwanda, Burundi, Zambia, Malawi and DRC, saw a contraction of 12%.

This is according to Steve Felder, Maersk Line Eastern Africa Managing Director, a member of A.P. Moller Maersk, who says the 2017 First Quarter East Africa Trade Report issued by the company reveals that aggregate trade levels in the region have improved slightly since 2016, resulting in overall year-on-year growth of 1%.

“While conditions in the East Africa region have continued to be challenging due to political instability, ongoing macro-economic headwinds and drought conditions affecting certain countries, we’re seeing healthy competition between the two corridors, both fighting for position in terms of some of the ‘swing’ countries that could export or import cargo through either corridor, specifically Rwanda, Burundi, Uganda.”

The Northern Corridor

While the Northern Corridor (serving Kenya, Uganda, South Sudan, and parts of Rwanda) import market experienced year-on-year growth of 6% in the first quarter, it declined slightly (by 1%) from the last quarter of 2016, says Felder.

“In Kenya, liquidity is still very tight, caused by last year’s interest rate capping on the bank lending rate. In the next quarter we are expecting to see a slowdown in the import market as we approach the Kenyan elections on 8 August 2017, based on a natural cycle that we see in every election period, whereby the market drops by around 20% as importers seek to remain liquid, as opposed to having their cash tied up in inventory.”

Felder goes on to say that a number of factors have resulted in a fairly sluggish start to the year with regards to exports, culminating in a decline of 10% compared with the same period last year.

“The poor performance exhibited by exports is largely a result of the drought that’s taken hold of Kenya and Uganda, severely impacting the agro-economy and exports of agro-based products, which are the main exports from the Northern Corridor.”

“In Kenya, which represents around two-thirds of containerised demand in the corridor, tea – the biggest export in containers by volume – saw a market drop of about 20 to 25% during the first quarter. There was also a reduction in soda ash volume, an input material for the manufacturing of glass, given the changes in market demand, as well as fish exports from Lake Victoria due to over-fishing.”

Felder does, however, point out some encouraging developments in the budget in order to stimulate local beneficiation and value-adding manufacturing.

“An important factor, impacting largely in a positive way, are duty changes from the most recent budget. For example, the reduction in corporate tax for vehicle assembly companies, duty exemption on goods exported to Special Economic Zones (SEZ) and imports by enterprises licensed under the SEZ Act to be exempted from import declaration fees.”

In terms of other developments in the Northern Corridor, Felder says there is still some sluggishness in the Ugandan economy, accompanied by static private sector activity, while the South Sudan situation has yet to improve, characterised by political instability and a shortage of foreign currency, resulting in many infrastructure projects coming to an untimely standstill.

Continued slowdown in the Central Corridor  

The containerised market in the Central Corridor (Tanzania, Burundi, Zambia, Malawi, DRC, and parts of Rwanda) represents a very different picture to that in the Northern Corridor, having contracted in both directions, says Felder.

“Compared to the same period in 2016 last year, the Northern Corridor import market experienced growth of 6% in the first quarter 2017 versus the first quarter of 2016. This is however a decline of 1% from the last quarter of 2016.

“In the domestic Tanzanian market, there have been a number of duty increases on various products, such as cement, paper, sugar and furniture, which reduces the buying power and ultimately the levels of demand for those products. Part of this is to stimulate local industry, such as sugar production, but there is also a definite drive for increased tax collection in the country.”

He adds that while the export ban of mineral sands out of Tanzania has also had an impact on the mineral industries from DRC, Zambia and Rwanda, the Rwandan market appears to present a positive outlook.

Regarding the rest of the corridor, Felder says that political uncertainty and conflict continue to be a challenge. “In Zambia, although the currency has somewhat improved, it still remains relatively weak in comparison to where it was a couple years ago. The situation in Burundi continues to persist, whereby the country is in the middle of a major conflict with a lot of uncertainty, similar to the political uncertainty being experienced in DRC, with the indefinite postponement of elections that were set to take place in November of last year.”

Outlook

Looking forward, the development along the Northern Corridor will very much depend on the Kenyan elections and the extent to which they are peaceful. A.P. Moller – Maersk expects, nevertheless, a short-term reduction in the import market, followed by a very quick recovery after the August elections.

Furthermore, if the interest rate cap decision is reviewed, liquidity could increase, boosting trade and increasing buying power.

For the Central Corridor, A.P. Moller-Maersk does not expect to see much fundamental change for the rest of the year.

“On the long term, we hope to see developments in mineral exports and we are also excited about the Rwandan market which is a buoyant economy and certainly seems to be taking a strong position in terms of becoming a key trading hub over time,” concludes Felder.

Leave a Reply

Ver peliculas online
%d bloggers like this: