2012-08-29 14:27:25 - Fast Market Research recommends "Kenya Shipping Report Q3 2012" from Business Monitor International, now available
BMI View: Good Performance Still Expected
We remain broadly upbeat about Kenya's ports and shipping sector, based on three main factors: reasonable economic growth in Kenya itself; a dynamic East African region (important because Mombasa acts as a trade gateway for many of Kenya's neighbouring countries); and finally, some signs that the port's ongoing congestion problems may be easing a little.
After experiencing something of a slowdown because of monetary tightening, we see Kenya's GDP growth picking up from mid-2012 onwards. As inflation comes down BMI believes the Central Bank will be encouraged to cut interest rates and stimulate consumer demand. With the country heading towards elections later this year or in early 2013, the Nairobi government can be expected to do
a little pumppriming through greater public spending, which will also help growth. Admittedly, after the communal violence experienced in the last elections there will be fears of rising political risk and perhaps a slowdown in investment; however, our expectation is that this time the elections will be hotly contested, but peaceful.
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Given the eurozone crisis foreign trade will perhaps not contribute much to Kenya's growth rate, though this should be offset by the relatively good performance of the country's East African neighbours, who are now responsible for almost 50% of Kenya's exports. Taking these factors into consideration we are predicting a GDP growth rate of 4.9% in 2012, rising to 6.0% in 2013. We expect the economy to grow by an average annual rate of 5.6% over the medium term to 2016.
Headline Industry Data
* Port of Mombasa tonnage throughput forecast to grow 4.79% in 2012 to reach 20.539mn tonnes. Growth to average 4.4% in the period running to 2016.
* Container throughput forecast to grow 7.35% to reach 826,595 twenty-foot equivalent units (TEUs) in 2012. Box growth to average 6.7% to 2016.
* 2012 total trade set for year-on-year (y-o-y) real growth of 4.0% and to average 5.6% to 2016.
Key Industry Trends
Progress In Mombasa's Congestion Battle?
There were signs of movement in Mombasa Port's long struggle with congestion, on the back of news that dredging work has been completed in some of the access channels. The dredging of Kilindini Harbour was finished four months ahead of schedule by Dutch firm Van Oord Dredging and Marine Contractors. In late May it was reported that major shipping lines were rerouting mega-vessels to the port in order to capitalise on the resulting economies of scale. Switzerland-based Mediterranean Shipping Company replaced some of its smaller container vessels with two Panamax vessels, namely MSC Roberta and MSC Jade, while French shipping line CMA-CGM deployed a 222 metre (m)-long vessel with a draft of 12m.
Lamu Corridor: Show Me The Money?
BMI has previously expressed concern that highly ambitious plans for the Lamu Port-Southern Sudan- Ethiopia Transport Corridor (Lapsset) infrastructure project may be frustrated because of the high cost and a scarcity of funds. We therefore welcome news that The African Development Bank (AfDB) is willing to be part of the project. The US$25bn proposal includes the construction of a port at Lamu, a 1,720km railway line connecting Kenya to South Sudan and Ethiopia as well as a highway along the same route. It also involves the construction of three airports, a pipeline from Kenya to South Sudan and Ethiopia as well as an oil refinery in Kenya. BMI believes the construction of the Port of Lamu is crucial not only for Kenya, but also for the other countries of East Africa which are reliant on the transit of goods through Kenyan ports.
KPA Is Bullish On 2012 Tonnage
According to media reports, Kenya Port Authority (KPA) expects cargo traffic via Mombasa, the key gateway into east Africa's landlocked countries, to rise by 5.3% this year because of strong economic growth in the region. Gichiri Ndua, KPA managing director, said the East African economies were growing by about 5% resulting in high consumption levels due to increased disposable incomes. 'We are likely to do 21mn tonnes this year... the economic performance of the entire region is a major player in what is going on at the port', he said. However, BMI is marginally more conservative in our predictions for Mombasa tonnage.
Key Risks To Outlook
The Kenyan ports and shipping sector faces quite a wide range of risks, with none being particularly dominant over the others. BMI has identified four main risks facing the wider economy, each with an indirect effect on the industry. These are the weather, political instability, global energy prices and inappropriate monetary policy. To these we must add the ever-present risk of congestion at Mombasa Port. Broadly speaking, the main downside risks are the weather - in particular the potential for a new drought - which would again hit the country's important agricultural sector; political instability (the risk of renewed violence in the coming elections); and the prospect of new and mis-timed monetary tightening which would delay the expected economic recovery.
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