2013-08-19 09:54:05 - New Transportation market report from Business Monitor International: "Kenya Shipping Report Q3 2013"
Post-Election Confidence Boost Kicks In
In the wake of the March presidential elections, the economic outlook for Kenya looks encouraging. The fact that the elections passed off without major violence or disruption - which had been widely feared - has provided a boost for business and investor confidence. Meanwhile, inflation is trending down, the currency is stable, and interest rates are falling. While export demand from Europe remains muted, the outlook for the country's nearby African trading partners is much more encouraging. We are now forecasting that GDP growth will pick up from 4.2% in 2012 to 5.7% in 2013. There are downside risks, such as the possible recurrence of dry weather that would hit the agricultural sector, and the persistence
of ethnic divisions that, despite the peaceful elections, could still come to the fore again on a one- to two-year timescale. It is also possible that the creation of 47 new counties - part of President Uhuru Kenyatta's commitment to a more devolved system of governance - could generate a fiscal imbalance. However, if these downside risks do not materialise, our core forecast is that Kenya will settle down to a 6%+ trend growth rate, providing a solid base for shipping demand.
Full Report Details at
BMI has 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, the continuing signs that the 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 on the long term.
Headline Industry Data
* Port of Mombasa tonnage throughput forecast to grow 4.3% in 2013 to reach 23.86mn tonnes. Growth to average 5.1% a year in the medium term to 2017.
* Container throughput at the same port forecast to grow 13.2% in 2013 to reach 1.02mn twenty-foot equivalent units (TEUs). Box growth to average 12.4% per annum to 2017.
* 2013 total trade set for year-on-year real growth of 6.0% and to average 6.8% per annum to 2017.
Key Industry Trends
First Quarter Box Traffic Falls At Mombasa: Container traffic at Mombasa declined by 7.5% in Q113 compared with the previous year. The fall was attributed to a downturn in economic activity prior to the Kenyan presidential election in March. Despite this, container traffic is expected to increase by 6% in 2013 compared with the previous year. Tonnage is predicted to total 22mn tonnes in 2013.
China's String Of Pearls Comes To East Africa: China is strengthening its geopolitical position in the Indian Ocean through its involvement with a number of key port developments in East Africa. BMI believes this involvement will not only strengthen Chinese trade with the region, providing the Asian dragon with access to raw materials and new markets for its manufactured goods, but could also provide the Chinese navy with refuelling stations, further encouraging speculation that China is following a 'string of pearls' policy in the region, developing ports in key locations. As part of this the Chinese Communications Construction Company (CCCC) and related companies are active in Kenya, participating in the development not only of the current primary port of Mombasa, but also in the Lamu mega project to the north.
Mombasa Privatisation Plans Bite The Dust: In late March, Kenyan president-elect Uhuru Kenyatta said that the port of Mombasa would not be privatised. Kenyatta said this during a familiarisation tour of the port and its operations. Kenyatta said that the port's efficiency and effectiveness would be improved in order to make it a world-class facility. The president urged citizens to maintain peace in a bid to ensure the development momentum in the country continues to drive the nation forward.
Key Risks To Outlook
The major risk to Kenya's economy stems from the weather. Poor rains have the potential to cause significant macroeconomic dislocation due to the effect that drought would have on agricultural output, inflation, hydroelectricity production and the currency. Additionally, although the smooth electoral process has lowered perceptions of political risk and has boosted sentiment, voting patterns suggest that Kenyans continue to overwhelmingly vote along ethnic lines meaning that risks of instability from ethnic rivalries have by no means disappeared. An escalation in tensions could serve to undermine investor confidence and render our growth outlook overly optimistic. Any scaling back of GDP growth projections will impact on shipping demand. Finally, while much needed expansion of port capacity is now underway, any delays also constitute a separate downside risk to our industry forecasts.
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