The fact that Kenya’s recent presidential election was conducted relatively peacefully should send a positive message to foreign investors, according to Alan Cassels, Kenya country manager of logistics company DHL.
When Kenyans went to the ballot boxes in 2007, things didn’t turn out well. More than 1,200 people were killed in inter-tribal fighting and thousands were displaced. Many were concerned that the March 2013 elections would be a repeat of the previous polls. However, despite these fears, the elections saw little violence.
“It just goes to show that the democratic process can be followed in Kenya without bloodshed. It is positive for all sorts of business and future investors as well,” notes Cassels.
“I think everybody is relieved that the elections are now over. The elections slowed business down significantly in the last quarter of 2012 and the first quarter of this year. People weren’t doing anything because they were so worried of what might happen. But thankfully the process went peacefully. We hope to see a marked pick up in the economy over the next few months,” he says.
The promise of oil and taking advantage of opportunities in South Sudan
According to Cassels, the recent discovery of crude oil in Kenya could hold significant potential for the economy.
In March 2012, UK-based Tullow Oil announced that it has found oil in the northern Turkana region. Local media last week reported that, according to the International Monetary Fund, commercial oil production could begin in the next six to seven years.
Cassels says he is also seeing a strong increase in the flow of goods into Kenya’s north-western neighbour South Sudan, which became Africa’s newest country after independence in 2011. South Sudan has few industries outside the oil sector and almost non-existent infrastructure. Kenya’s Export Promotion Council chairman Hudson Aluvanze recently said that South Sudan, if well tapped, could be the game-changer in boosting Kenyan exports.
“The business going into Juba (South Sudan’s capital) is growing fast. As DHL we ship all sorts of things to Juba. It really is everything from computers for government offices through documents to spare parts. You name it, we ship it there,” says Cassels.
The East African Community (EAC) economic bloc – comprising Kenya, Tanzania, Uganda, Rwanda and Burundi – also holds considerable potential for Kenyan companies. While Kenya has a population of around 40 million, the greater EAC region opens up a market of over 130 million people.
Cassels, however, believes that much more needs to be done to boost the flow of goods within the EAC region. “In terms of customs procedures, the EAC countries are not really aligned at all.”
He says that East African countries should make it easier to import low value goods. Cassels explains that for an item valued at US$30, the government collects on average about $6 of duty revenue. However, the cost of collecting that duty – including the paperwork and various permissions that need to be obtained – often adds up to an amount much higher than the government’s revenue on the product.
Over-complicated customs procedures also have a negative impact on the broader economy. “Take for example someone who operates a one-man transport business, and say his truck breaks down. It takes two days to get the spare part from China. When it arrives in Kenya it takes a week to clear customs. This means the guy is off the road for more than a week – he is not buying fuel, which would generate tax revenue for the government, he can’t feed his family, and all the rest of it.”
Africa becoming more confident
Africa’s strong economic growth over the past decade has been well documented. The continent’s image is slowly but surely changing from a region plagued by poor political leadership, poverty and war, to that of a potentially lucrative business destination.
For Cassels, the ‘Africa rising’ narrative is a reality he is experiencing on the ground. He, however, believes that the continent’s transformation will take slightly longer than most people expect.
“I think Africa is much more confident than it was a few years ago and that is great to see.”