2014-01-25 17:48:02 - Recently published research from Business Monitor International, "Kenya Shipping Report Q1 2014", is now available at Fast Market Research
Strong Fundamentals Lift 2014 GDP Growth To 6.1%
While the violent attack on the Westgate Mall in Nairobi in September 2013 was a reminder of the potentially high political risk in the region, our outlook for the Kenyan economy remains very positive. That event aside, we are predicting that a combination of relative political stability, rising investment, and Kenya's status as the commercial hub of a fast-growing region will underpin strong GDP growth. BMI is now projecting 6.1% GDP growth in 2014 followed by 6.2% in 2015. In our view Kenya's capital, Nairobi, and key port, Mombasa, remain well-placed as the commercial centre of an East African Community (EAC) enjoying a resource boom and 7%-plus annual growth rates.
At home, growth will
be led by strong household consumption (rising as more Kenyans join the ranks of the middle classes and despite continuing income inequalities), comparative price stability, and robust investment. Public spending will also rise, particularly since the introduction of reforms in 2010 which require the creation of a new level of government - 47 county-level administrations with a wide variety of responsibilities for agriculture, transport, and health services. Net exports will, for the moment, be something of a drag on Kenyan growth, although we note the beginnings of a move to diversify from raw or semi-processed agricultural goods in the direction of manufacturing, including automobile and motorcycle assembly.
Full Report Details at
We have a positive outlook for Kenya's ports and shipping sector based on three main factors: reasonable economic growth in Kenya itself; a dynamic East African region (this is important because Mombasa acts as a trade gateway for many of Kenya's neighbouring countries); and finally, continuing signs that Mombasa port's ongoing congestion problems are easing. Granted, there are significant threats to Mombasa's almost monopoly-like role in this part of Africa, but they exist in the long term.
Headline Industry Data
* Port of Mombasa tonnage throughput forecast to grow 5.2% in 2014 to reach 24.511mn tonnes. Growth to average 5.3% a year in the medium term to 2018.
* Container throughput at the same port forecast to grow 11.9% in 2014 to reach 1.141mn twenty-foot equivalent units (TEUs). Box growth to average 12.0% per annum to 2018.
* 2014 total trade set for y-o-y real growth of 5.6% (marginally down on 5.8% in 2013) and to average 6.6% per annum to 2018.
Key Industry Trends
Mombasa Hit By Power Outage: In October 2013 power supply to Mombasa port was disrupted after a fire broke out at Kenya Power and Lighting's Kipevu power station. The outage at the port lasted three days and is estimated to have caused losses of KES 69.4mn (US$0.8mn). The port's electrically-powered gantry cranes could not be operated. 'Power is a big challenge. Blackouts and upsurge affect us so much, which also mess up the equipment,' said Bernard Osero, a corporate affairs manager at the Kenya Port Authority. He added that in situations such as these operations at the port are hindered, which leads to a build-up of ships waiting to berth. Other areas affected include the port gates operation where gate processes are slow despite emergency generators being put to use.
Funds Being Sought For Strategic LAPSETT Project : Kenya is reportedly seeking to attract Arab funding to fast-track lagging progress on the LAPSSET (Lamu Port - Southern Sudan - Ethiopia Transport) project, which is estimated to cost KES1.5trn (US$17.3bn). LAPSSET is a transport project that will link Kenya, South Sudan and Ethiopia. The project will include the construction of the port of Lamu on the Kenyan coast, north of the existing port of Mombasa, as well as a highway that will run directly from the planned port to South Sudan and Ethiopia. A 1,500km standard gauge railway line will run alongside the highway, as well as an oil pipeline. The LAPSSET project will also feature the construction of an oil refinery as well as three Kenyan airports, with one based in Lamu.
Rivalry With Tanzania Over Rail-Port Project: A railway line that will connect the three East African Community (EAC) nations of Kenya, Uganda and Rwanda presents downside risks to fellow EAC bloc member Tanzania's container traffic at its port of Dar es Salaam. Once complete in 2018, we expect importers and exporters to choose the new railway when transporting goods from the eastern coast of Africa, as it will cut delays caused by poor road infrastructure and border crossing delays. The railway will link to the Kenyan port of Mombasa, giving it an advantage over Dar es Salaam as both compete to be the trade gateway into the EAC.
Key Risks To Outlook
Much of Kenya's agricultural production is rain-fed, meaning that inclement weather poses a key risk to our growth and ports/shipping forecasts. In 2011 poor rains caused a serious food crisis, and was the cause of the inflationary spike felt in the second half of that year. While preliminary forecasts indicate that the 2013/2014 harvest should be slightly stronger than the 2012/2013 season, accurate production estimates will not be available until late in the first quarter of 2014.
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