Page 1


• Only Paint with a 7 year Guarantee • Premium quality with exterior durability & superb colour stability • Low maintenance – it lasts up to twice as long as conventional finishes *Terms and conditions apply

We are proud to be associated with Stellar Builders Ltd Let Sadolin Colour Your World 0722 480 576


CONTENTS

Welcome...

Procurement & Logistics Management, March - April 2016 issue

FEATURES ...................................................................................... MAERSK returns to UK port, Liverpool as Oil arm makes foray into Kenya

Maersk Oil of Denmark made a $427 million deal with Kenya’s Tullow Oil in three exploration blocks located in the Lokichar basin

22

DEPARTMENTS .................................................. 3. EDITORIAL 4. BRIEFS 8. NEWS 22. FEATURES 30. REPORTS 32. TIPS

Next issue .................................................. In our next issue, we are covering Warehousing and Packaging in logistics. If you would like to advertise or contribute on any of the supplements or features please contact us on 020 440 4488 or send us an email to: sales@ proclogistics.com

BOOKING DEADLINE Monday 18 April 2016

24.

Construction equipment leasing with VAELL

Leading leasing firm in Kenya now banks on high demand for construction equipment to bloom.

26.

Zetech University soars high with new Procurement Course

Vice Chancellor says Purchasing and Supply Management degreecourse will help tackle challenges in the procurement industry.

REPORTS ...................................................................................... 30.

Special Report: Counting the Economic Cost of Fighting and Preventing Terrorism Government expenditure on security have surged amid threats from emerging terror organizations. We look at how fighting and preventing terrorism is becoming a costly affair.

TIPS ...................................................................................... 32.

Want to improve your supply chain performance?

Supplier development is a bilateral effort by both the buying and supplying organizations to jointly improve the supplier’s perfor- mance and/or capabilities in one or more of the following areas: cost, quality, delivery, time-to-market, technology, managerial capability, financial viability and environmental.

MANAGING EDITOR Okumu S. Biko EDITOR Anthony Kiganda

Modern ports can boost the economy

WRITER Sandra Dinga

or any country, international trade provides a much needed impetus for the growth of the economy. In this light the completion of the first phase of Mombasa Port development project should be applauded. The Sh22b project aims to reduce congestion at the port and thus facilitating easy movement of cargo.

F

GRAPHIC DESIGN & LAYOUT Augustine Ombwa

This is very important to our regional neighbours given the millions of containers evacuated annually for local and regional consumption. Mombasa Port is a major provider of essential international maritime links for land-locked neighbouring countries.

CIRCULATION Proc & Logistix Consult

Uganda for instance, relies heavily on the Port of Mombasa about 80 per cent of its imports pass through the port, accounting for about 15 per of total traffic through Mombasa. A simple analysis indicates that about six vessels with a capacity of between 2,000 and 3,000 cars call at the Mombasa Port. The Port offers a diverse range of services to enable shippers to export and import cargo worldwide. These services include pilotage to ships; berthing of ships; stevedoring; and, shore handling of cargo. Containers and bulk-cargo vessels included it translates to more than 10,000 cars and containers transiting the port to different destinations, with clearing agents handling billions of shillings in fees and disbursements monthly. If well managed and regulated, the industry is capable of giving the country better returns, both in terms of wages and revenue on a Monthly basis. Converted into revenue in terms of tax collection and related dues, translates to billions of shillings. The requirement that all transactions be handled by clearing agents means that to secure the industry’s earnings, the freight forwarding process must be professionally run. All stakeholders must uphold business conduct that is above reproach to achieve a more successful and robust clearing and forwarding sector. There is more than enough in the freight logistics sector to sustain and grow the Kenyan economy; all that needs to be done is for the industry to insist on professional, well-trained cargo handlers with integrity. A new frontier that we now need to adopt is training of all personnel handling cargo. This should be spearheaded by Kenya Revenue Authority and Kenya ports Authority. More trained personnel handling cargo will result in better efficiency at the port and other related frontiers, translating to more revenue. Regional confidence would also be enhanced, which would see the Mombasa Port become the port of choice.

We once again welcome you to this edition.

MARKETING EXECUTIVE Ken Okore

...................................................... Procurement & Logistics Magazine @ LogisticsProc

...................................................... The editor accepts letters and manuscripts for publication from readers all over the world. Include your name and address as a sign of good faith although you may request your name to be withheld from publication. We reserve the right to edit any material submitted . Send your letters to: editor@proclogistics.com Procurement & Logistics Management. is published six times a year and is circulated to members of relevant associations, governmental bodies and other personnel in the procurement, logistics and finance industries as well as suppliers in East and Eastern Africa. The editor welcomes articles and photographs for consideration. Material may not be reproduced without prior permission from the publisher. The publisher does not accept responsibility for the accuracy or authenticity of advertisements or contributions contained in the journal. Views expressed by contributors are not necessarily those of the publisher. © All rights reserved. Copyright - Procurement & Logistics Management. No part of this publication may be copied or reproduced without prior permission from the publisher


BRIEFS

BRIEFS

Atlas appoints MH Engineering Plc

Centum signs new deal for high-end Courvoisier brand

C

L

ogistics Company, Atlas Development & Support Services has appointed MH Engineering Plc to provide design services for a proposed bottling plant in Ethiopia. The facility, which will be located 45 kilometres from Ethiopia’s capital Addis Ababa, is expected to have an annual output of 105 million bottles of 330 milliliters. Ethiopian based MH Engineering Plc will undertake the architectural, electrical, structural and mechanical designs in relation to the project. MH Engineering Plc has specialties in the development of buildings, roads and transportation engineering feasibility studies and infrastructure projects management. Also known as the Chancho Project, the bottling plant is Atlas’ first venture outside the logistics business. The cross listed company has registered a decline in fortunes with the plunge in crude prices forcing it to exit the Kenyan market last year. Atlas chief executive officer Carl Esprey said the appointment of MH Engineering soon after their fundraising together with

6

the commencement of ground clearing and drilling was a clear demonstration of their commitment to rapidly expand the project into a state-of-the-art bottling facility. The bottling plant targets the existing deficit in supply of locally made glass bottles in the East African region where demand is expected to progress with expansion in the beverages and beer industries. Last month, Atlas got a 100 year lease for setting up the bottling plant. The firm ventured into the Ethiopia market in November last year with the acquisition of East Africa Packaging Holdings Limited that was the original owner of the bottle manufacturing project. Meanwhile, it is banking on the new industrial division to improve its cash flow whose challenges have seen it pile up debts to Kenyan creditors amounting to more than Sh400 million. During the year to June 30, Atlas reported a net loss of Sh1 billion. The firm incurred Sh147 million in finance costs while its operating expenses increased to Sh1.2 billion from Sh262 million incurred during the previous year.

entum has announced the signing of a distributorship contract with King Beverage, one of the world’s premium alcoholic spirits makers. The new partnership will see the NSE-listed firm’s subsidiary exclusively market renowned brands like Courvoisier and Jim Beam locally. King Beverage will solely distribute the portfolio of Beam Suntory, a $4 billion spirits maker based in Illinois, USA. King Beverage is a subsidiary of the Nairobi Securities Exchange (NSE) traded Centum. The new deal was signed through a joint venture, Edrington Fix Middle East (EFME), a spirits distribution business that operates in the Middle East, the Gulf and North Africa. Meanwhile, Centum is already the exclusive local distributor for Carlsberg, a Danish brewer. EFME Managing Director, Igor Boyadijian, said the Kenyan market has a great potential and that finding the right partner for the Beam Suntory portfolio in East Africa was a priority for them. Centum is also set to distribute Teacher’s, Knob Creek bourbon, Hakushu and Yamazaki whiskies among other brands, as part of the deal. Centum seeks to have a piece of the lucrative

market currently controlled by the East African Breweries. Centum’s acquisition will see the termination of contracts with some of the independent distributors who are presently supplying some of these drinks in the Kenyan market. The company has however declined to reveal the value of the deal which is supposedly long-term in nature. The company says the deal is only restricted to Kenya and the cost of the products to be distributed will range between Sh2, 000 and Sh7, 000. A cognac, such as the Courvoisier drink, is a brandy variety made using grapes while bourbons like Jim Beam are whiskies primarily distilled from corn. “We will make history together with Beam Suntory teams. We will work harmoniously to build and expand our rich portfolio that comprises bourbons, cognac and single malts,” Mr Boyadijian said. Centum entered the beer market mid-2014, where it signed a deal with Carlsberg Group to sell its beer brands in Kenya as it made strategic plans to diversify its revenue streams, one that will see it jostle for consumers in a market dominated by EABL. King Beverage has since established a countrywide distribution network at bars, restaurants and

Procurement & Logistics Management2016

Centum signs new deal for high-end Courvoisier brand

supermarkets. “We aim to work with international partners in a bid to tap into the growing consumer base and create value especially to our customers together with our shareholders,” said John Ngelu, King Beverage general manager. Beam Suntory, the world’s third-largest spirits maker has a wide portfolio that comprises bourbons, whiskies, vodkas, rums, tequilas, cordials, cognacs as well as gins. The firm has since entered into partnership with Centum to meet the increasing consumption of spirits in Kenya. Beam Suntory brings together American and Japanese brands. East African Breweries Limited has continued to post sustained double-digit growth. The regional brewer sells premium spirits such as Smirnoff Vodka and other highend drinks such as Johnnie Walker. A survey by the Scotch Whisky Association in 2013 revealed that Kenyans consumed an approximated half a billion shillings worth of Scotch that year up from Sh293 million the previous year. EABL has made a swift move to counter this by introducing new products in the market. It has recently launched brands such as the Talisker Storm and Talisker 10 whiskies which retail at a premium price of over Sh5, 000 for a 700ml bottle. Beam Suntory is keen on getting a piece of this pie, choosing to partner with one distributor with the financial, distribution and marketing muscle to push its products as opposed to making sales through multiple independent firms.

Procurement & Logistics Management2016

DHL launches flat fleet option in Jamaica

D

HL Express, the world’s leading international express services provider, today announced the launch of Express Easy, a new service that brings simple, allinclusive rates to international shipping. The new service, launched in Jamaica throughout the island in Kingston, Montego Bay, Mandeville, May Pen, Savannla-Mar, Ochi Rios, Portmore and Linstead, gives walk-in customers access to lower prices from the standard DHL Express Worldwide service. DHL intends to have the service available across the entire country by March 2016. Each box used for shipping DHL Express Easy, sold as a onepiece shipment, comes with a defined maximum weight and a simple rate based on the shipment’s destination. Non-account holders and cash customers can visit one of the locations to take advantage of Express Easy and send an international export delivery of document and/or non-document shipments. “DHL Jamaica understands that every dollar spent is important to customers, and as such, continues to look for easier and more cost-

effective ways for them to ship internationally,” said Donovan James, Country Manager of DHL Express Jamaica. “Small and medium-size enterprises, or SMEs, are the key drivers of growth for our economy. The introduction of DHL Express Easy to the Jamaican market, along with the international logistics expertise that DHL has, will be very beneficial for them in terms of pricing structure and will help SMEs to expand and grow their business internationally,” added James. Express Easy provides a simplified, easy-to-use range of packaging solutions at a convenient price worldwide. This streamlines administration, and allows for greater control of revenues and expenditures without compromising the monthly budgets of SMEs.

7


BRIEFS

BRIEFS

Kenya gets closer to First Phase of Mombasa Port complete direct US flights

J

T

he opening of two terminals at the Jomo Kenyatta International Airport (JKIA) and the introduction of a Bill in Parliament that will integrate international standards with the country’s aviation laws are set to raise new hope in Kenya’s quest for direct flights to the US. The Civil Aviation Amendment Bill 2015, which the Sunday Nation has seen, seeks to give full regulatory powers to the Director General of the Kenya Civil Aviation Authority (KCAA) while insulating him/her from political interference. It will also increase the powers of the authority to include a role in airport security while granting it unhindered access to all aircraft within Kenyan borders and airspace, their documents and access to all airport sections. Aircraft will also carry on board their certificates of registration, certificate of airworthiness, certificates of each flight member, a logbook and radio licence whenever they fly. This comes as Kenya rushes to prepare itself ahead of an audit by the US Federal Aviation Administration (FAA) set for next month that would determine if the country’s largest airport would be upgraded to the much coveted Category 1 status. The two terminals 1A and 1E expected to be opened by President Uhuru Kenyatta this week will separate arrival and departure traffic which is one of the conditions set by the US authorities for granting permission

8

for direct flights between the two countries. Their construction was part of an ambitious Sh6.4 billion upgrade of the airport that included the construction of a new security screening centre, clearing of the flight path, fencing the airport and the setting up of a GSU base inside the airport. Transport Cabinet Secretary James Macharia told the Sunday Nation that the government has given itself a May deadline to complete the conditions set for approval of flights between Kenya and the US. “Kenya has completed almost all relevant audit requirements by the US aviation authorities and the dream of direct flights between the two countries is within reach,” he says. “It is up to the National Assembly to hasten the process of passing the Civil Aviation Bill once it is taken to the floor of the House,” he said. But despite the government’s optimism, a recent security advisory by the FAA could complicate matters for JKIA. “Al-Shabaab continues to demonstrate the capability to target aviation interests in Kenya. In January 2014, four suspected AlShabaab operatives attempted an improvised explosive device (IED) bombing of a coffee shop outside of the international terminal at Jomo Kenyatta International Airport (JKIA) in Nairobi,” says the advisory issued on February 26 and set for review next year.

apan has confirmed completion of the first phase of the Mombasa Port Development Project (MPDP). The Sh22 billion project which aims to decongest the Mombasa Port commenced in March 2012 and was scheduled to be completed by end of February 2016, with the remaining second and third phases to be completed in 2017 and 2020 respectively. Masati Kaneko, Deputy Project Manager said they are within the schedule as planned on completion of phase one of the expansion project which was ready to be handed over to the government. “The new terminal has a capacity to handle 550,000 containers which is expected to increase the capacity of Mombasa Port to over 50 per cent. Completion of the whole project will see Mombasa Port rank the largest in East Africa,” Mr Kaneko said. Currently, Mombasa handles an average of one million containers a year, but it has a projected target of 1.32 million with the introduction of the new terminal. Good access roads, trunk roads and connection roads which are fully operational are expected to ease cargo traffic and reduce turnaround times. President Uhuru Kenyatta is expected to officially open the new terminal at a date yet to be confirmed. Japan’s Toyo Construction Company undertook the construction of

package one of the first phase of the construction. Package one mainly involved construction work and took period of48 months from March 2012.Kaneko said package two, which is procurement of equipment by Toyota Tsusho Corporation, two took 20 months from December 2015 and is 100 per cent complete. Toyota has procured two ship-to-shore cranes, and four other cranes that will operate on shore. The container terminal yard at the port sits on 35 hectares and is 15 metres deep. It is able to dock an 800-tonne ship up to 50 metres high. Over 20 million tonnes of sand and 4,000 tonnes of stones from the deep sea were excavated to pave way for dry land and a deeper harbour. The total reclaimed volume was 3.7 million cubic metres. Kaneko sighted this as the major challenge, which took close to a year. Prefabricated Vertical Drain (PVD) technology was used to speed up the process before soil improvements were done to make the yard more durable. In addition, more than 1,500 mangrove trees were planted in Mikindani to replace those cut during construction. This was done to cater for the environmental impact. The Japan International Cooperation Agency (Jica) has since signed an agreement worth Sh24 billion with the Kenya Ports Authority for the construction of phase two of the MPDP.

Procurement & Logistics Management2016

Tanzania agrees with CIC makes foray into real Uganda on oil pipeline estate

C

T

anzanian President John Magufuli has said that Tanzania and Uganda have agreed to build a crude pipeline linking their countries, connecting landlocked oilfields to the Indian Ocean. The proposed link will cover 1,120 kilometers (700 miles) and its construction will create 15,000 jobs, Magufuli said in a statement e-mailed by his office in Dar es Salaam, the commercial capital. The heated pipeline will cost about $4 billion and the two countries’ government plan to “move very fast” to implement the project, said James Mataragio, managing director of the stateowned Tanzania Petroleum Development Corp. “We have a meeting with our counterparts next week to execute the project,” Mataragio said by phone from Dar es Salaam. “So after next week, that’s when most of the details will come out.” Tanzania is competing with neighboring Kenya for the pipeline that will tap Ugandan oil deposits being developed by companies including Total SA of France, China National Offshore Oil Corp. and London-based Tullow Oil Plc. Total Chief Executive Officer Patrick Pouyanne met Ugandan President Yoweri Museveni in December and said his company preferred transporting crude via Tanzania. Tullow has also discovered oil in northern Kenya. Museveni said Tuesday on his Twitter account that he had “discussed plans” about the pipeline with Magufuli and that it

would employ 1,500 people. Uganda’s government said in October it was considering sending its crude through Tanzania as a lower cost option to the Kenya route. Kenya projects the cost of the pipeline would be about $4.5 billion. Decisions on the design and financing of the pipeline and a refinery have repeatedly pushed back the target date for producing Uganda’s first oil, after deposits were initially discovered a decade ago. Ernest Rubondo, head of Uganda’s Directorate of Petroleum, said last month the government would make a decision on the routing of the link in the first half. He didn’t answer calls on Wednesday when Bloomberg sought further comment. Bukenya Matovu, a spokesman for Uganda’s energy ministry, said he didn’t know whether the agreement with Tanzania was a final decision and that such a project would need a bilateral agreement. “Maybe that is one thing they talked about,” Matovu said by phone. Uganda is interested in the Tanzanian route because “it is shorter and more secure in light of what is happening in Somalia,” Matovu said. One of the routes proposed by Kenya would be through it’s northern territory to the coastal town of Lamu. Those areas are close to Somalia, where Islamist militants have been waging an insurgency against the government for the past decade.

Procurement & Logistics Management2016

IC Group will venture into real estate with a Sh2.8 billion commercial and residential development on its 200 acre parcel in Kiambu county. The listed underwriter’s chief executive Tom Gitogo said this was in line with the company’s plan to safeguard investor funds from the volatility of the financial markets where they had invested the bulk of their investor funds. The GCEO was speaking in Nairobi during an investors’ briefing where he disclosed that the firm’s net profit for the period ended December rose by 4.4 per cent to stand at Sh1.13 billion. The mixed development will be launched mid this year after a property consultant currently on the ground completes work where CIC will largely put up high-end, medium and studio apartments targeting the entry level market on land located next to Tatu city. Mr Gitogo said that premium undercutting in the insurance industry created an unhealthy environment to operate in and urged Kenyans to look at the benefits when deciding on what policies to buy and not the cost of premiums. The CIC boss added that gross premium for the 2015 period under review decreased to Sh 11.4 billion compared to Sh 13.7 billion in 2014, which was blamed on relieving CIC of nine of its key clients who paid handsome

premiums but also made the company incur heavy losses from numerous claims made. He said CIUC Group welcomed the planned risk based supervision framework under review by Insurance Regulatory Authority (IRA) against the current system where insurance companies only had to meet a specific minimal capitalization to be licensed. “In future we shall have to be rated based on the amount of risks insured versus capital. We have capitalized and we shall not need to seek a cash injection to meet the new IRA requirement,” he said. On the Uganda, Malawi and South Sudan subsidiaries, Mr Gitogo said they were still investing in them, adding that the firm expected to enjoy handsome returns of up to 40 per cent profit from the three units as well as from the stake in Takaful Insurance. The insurance group, which enjoys a 1.3 million customer base, said it would capitalize on its sacco and co-operative movement distribution network to grow its new business especially on crop and livestock insurance. CIC Group comprises of three locally registered companies, CIC Life Assurance, CIC General Insurance Limited and CIC Asset Management with a nationwide 25-strong branch network and 1,000 financial advisors.

9


NEWS

Creating Retirement Wealth For Members OUR VISION

To be the leading scheme in Kenya providing secured retirement

OUR MISSION

Uchumi eyes KPMG as new Auditors

K

PMG is set to take over from Ernst & Young the auditing of troubled retailer Uchumi Supermarkets, which has accused its former top management of manipulating its last year’s financial statements. The consultancy, classified as one of the “big four” global accounting and auditing firms, will take over the role if Uchumi shareholders approve the change at its forthcoming annual general meeting slated for January 20.

Julius Kipng’etich, who was hired in August as Uchumi CEO to turn around the fortunes of the struggling retailer, said the accounting fraud resulted in the firm plunging into the red financially. “Sh1.04 billion for write-off, which relates to items arising from management misrepresentation and manipulation of the system by the previous management,” Uchumi said when it made public the allegations of accounting irregularities by the former management.

“To appoint Messrs KPMG Kenya as the company’s auditors for the next financial year,” reads one of the agenda items for the upcoming shareholders’ meet.. KPMG had been hired to carry out a forensic audit at Uchumi, with preliminary findings revealing that the former management had manipulated books and concealed losses in the retail chain’s financial statements.

The imminent appointment adds to a growing list of changes in auditors at both listed and non-listed firms at a time there is increased focus on the role and quality of work done by accountants. Mumias Sugar last month hired RSM Eastern Africa as its auditor, taking over from Deloitte & Touche, which was accused of professional misconduct in handling the books of the loss-making sugar miller.

Ernst & Young, which trades as EY, raked in Sh19.5 million in audit fees from Uchumi for the year to June 2014, a 41 per cent increase from the Sh13.7 million earned a year earlier.

Parker Randall Eastern Africa — led by former Mumias Sugar boss Coutts Otolo — bagged Olympia Capital as its audit client from Crowe Horwath, a firm where he was previously a

10

partner but fell out with his associates. The fourth-placed Uchumi —after Nakumatt, Tuskys, and Naivas supermarkets in revenues — posted an after-tax loss of Sh3.4 billion in the year to June 2015 following a decline in its sales volumes. This is the second time Uchumi is being caught in a maze of accounting fraud, putting its auditors on the spot. PwC was investigated in the wake of Uchumi Supermarkets’ nearcollapse in 2006 on whether its audit opinions were up to professional standards. Ernst & Young was earlier last year probed by the Commissioner for Co-operative Development over its role in Mwalimu Sacco’s acquisition of a majority stake in Equatorial Commercial Bank from billionaire businessman Naushad Merali. EY, as auditors of East African Portland Cement (EAPCC) in the year to June 2013, was also caught up in allegations made by the government of financial irregularities at the Athi River-based firm.

Procurement & Logistics Management2016

To receive, prudently invest and manage member contributions for prompt payment of benefits for secured retirement

OUR CORE VALUES

Customer focus and service excellence, Transparency, accountability and equity, Innovation and Continuous Improvement, Professionalism and Integrity

LAPFUND is a scheme established by an Act of Parliament, Local Authorities Provident Fund Act CAP 272.

Over the last six years, our fund value has exponentially grown by 540 %, from a low of 3.7 billion to a high of 23 billion through:• Continued growth in membership through new enrollments. • Prudent investments in compliance with the RBA guidelines. • Sound legal framework.

1. Retirement Benefits 5. Death benefit

OUR PRODUCTS 2. Withdrawal Benefits 3. Invalidity Benefit 4. Emigration Benefit 6. Funeral Grant

7. Pension Backed Mortgage

8. Gratuity Management Benefits

Head Office | ICEA Building, 8th floor, Nairobi CBD | P.O. Box 7952 - 00200 Nairobi | Tel: 020-3589105/6 / 0737121879 / 0714606998 Nakuru Office Mombasa Office Nyeri Office (Central Zone Office) Kisumu Office (Western Zone Office) Polo Centre, 1st Floor, Kaderbhouy Building, E.K Wachira & Sons Building, Al-Imran Plaza, 2nd Floor, 1st Floor, Nkuruma Road, Kenyatta Avenue, Kimathi Way, Nyeri Town, Oginga Odinga Street, Kisumu Town, Tel: 0724150118 Tel: 0721859487 Tel: 0713515709 Tel: 0712351240 www.lapfund.or.ke


NEWS

International Logistics Firm ranks Kenya top four in Africa

A

new survey of global logistics executives show that Kenya is among top-four countries in Africa with the biggest economic growth promise over the next five years.The survey by Agility, a global logistics provider, also shows that consumer spending by a fast-growing middle class is as important a growth driver in Africa as mineral and oil resources. In the 2016 Agility Emerging Markets Logistics Index, Kenya is ranked behind South Africa and Nigeria but ahead of Ghana and Angola in the list of top five promising states. “The market is open for first movers who can navigate risk and nurture African talent,” says Geoffrey White, the chief executive officer of Agility Africa. “The opportunity is for those seeking to build long-term, sustainable businesses that bring world-class practices and adapt to local conditions. Africa’s requirement for logistics services and supply chain expertise is huge and growing every day.”

12

The 1,100 logistics executives polled in the survey said that low energy costs, recent oil finds, continued investments in infrastructure and the horticulture industry are working in Kenya’s favour. “A particularly surprising statistic is that Kenya is the third-largest emerging market air export trade lane by tonnage, exceeding not just its continental competitors such as South Africa and Nigeria, but even the likes of India,” the survey noted. Horticulture is a leading source of foreign exchange for Kenya, alongside tea and tourism. The logistics executives however pointed out that despite the promise shown by African states, poor infrastructure, lack of power and corruption continue to pose the greatest risk to their entry. Only 21.2 per cent of logistics industry executives surveyed said that their companies have operations there while 12.7 per cent said they are in the planning stages to enter African markets. However, more than 43

per cent of them said they have no plans to set up in Africa. “The results show a serious disconnect between the perception of the market and actual opportunities,” said Mr White. “At the same time, many of the companies that need logistics to enter the market don’t know how to get started in Africa or aren’t willing to take the risk.” China, the world’s second-largest economy, topped the global ranking followed by the United Arab Emirates, India, and Malaysia with Saudi Arabia completing the list of the top countries. In Africa, South Africa emerged was 16, Nigeria (17), Morocco (20), Egypt (22), Algeria (30), Ethiopia (37), Tanzania (40), Libya (41) Kenya (43) while Uganda was placed 45.

Procurement & Logistics Management2016


NEWS

Own Your Asset For Business Growth Among the benefits are:

Fast loan processing Competitive interest rates Finance available for all vehicles Flexible repayment term tailored to suit your cash flow Low deposits for newer vehicles Available for non customers Full ownership of the asset throughout the loan term

Minimum requirements:

Bank statements for past six months Proforma Invoice from the dealer Open an account with Remu Microfinance Bank Evidence of business performance and projections

We also have:

Insurance premium finance (IPF)

SAVING PRODUCTS Taratibu Savings Account Remu Fixed Deposit Account Jipange - Budget Savings Account Kikundi Dhabiti - Group savings accounts Darubini - Student Account Lil’ Angel - Junior Savings Account

Kenya Airways to restructure

K

enya Airways Ltd., sub-Saharan Africa’s third-largest airline, is planning a 70 billion-shilling ($690 million) restructuring program that includes reducing its fleet and cutting staff, Chief Executive Officer Mbuvi Ngunze said. The carrier, based in the capital, Nairobi, has been working on a turnaround plan after reporting the largest loss in Kenyan corporate history last year. The carrier plans to raise 40 billion shillings through debt and equity funding as part of its strategy, Ngunze said in an interview aired Wednesday on Citizen TV, a Nairobi-based broadcaster. “Do we need to rationalize our staff? Do we look at opportunities to reduce costs? Yeah,” he said. “We will be totally sensitive with this as this is an emotive issue, but certainly there will be some hits.” The carrier has sold two Boeing 777-200 aircraft and will sell two more, and it’s searching for carriers to sub-lease four of its

14

Boeing 777-300 planes for a period of four or five years. A reorganization plan developed by McKinsey & Co. seeks to return the company to profit and may result in its 4,000-strong workforce being cut by at least 30 percent, according to Eric Musau of Standard Investment Bank Ltd. Last month, the airline appointed PJT Partners Inc. to advise on how to restructure the company’s balance sheet and raise longterm financing. Bailout Proposal Kenya’s government, which owns 28 percent of the carrier, has said it will help bail out KQ, as it’s known. The state has been reviewing the airline’s partnership with Air France-KLM, the second-largest shareholder. The government may increase its stake to 50 percent equity, depending on how other shareholders want to participate in the restructuring, Treasury Secretary Henry Rotich said last month.

The government is confident about the turnaround strategy, Rotich said in an interview Wednesday in Nairobi. The state is providing bridging financing as work is completed on the recapitalization plan that will focus on “growing it and financing it to have a stable balance sheet going forward,” he said. The relationship between Kenya Airways and Air France-KLM “remains important to KQ, but like many partnerships needs to be modified,” Perry Cantarutti, president of the SkyTeam airline alliance that includes the Kenyan carrier, said last week. Kenya Airways shares have fallen 30 percent since July 30, when the company reported a 25.7 billion-shilling loss. Over the past decade, the stock dropped from a record high of 142.74 shillings to 4.40 shillings on Thursday.

Procurement & Logistics Management2016

LOAN PRODUCTS

Kimathi House Branch, Nairobi Coming Soon Head Office / Nairobi Branch 14th floor, Finance House, Loita Street, P.o. Box 20833 00100 Nairobi Tel: +254 20 2214483, 2215387/8 Mobile: 0733 554 555 Email: info@remultd.co.ke businessdevelopment@remultd.co.ke

Biashara pamoja - Group Business Loans Workplace Group Personal Loans Remu LPO Solution Remu Working Capital Remu Asset Financing Boostika Personal Loans

Deposit using REMU Fast Pay through paybill No. 95 33 00

Meru Branch Tom Mboya Street P.O. Box 586 - 60200, Meru Tel: 064 - 32760/1/2/3 Mobile: 0737 - 553555 Email: Info.meru@remultd.co.ke

Maua Unit P.O. Box 239-60600 Maua Tel: 064 - 21000 Cell: 0737 554 557 Email: Info.maua@remultd.co.ke

www.remultd.co.ke


NEWS

Empowering Youth with Vijana Business Loans

Kenya Ports Authority wants to grow re-export cargo activities

K

enya Ports Authority (KPA) says it is eyeing higher volumes of transshipment cargo when it takes over the completed phase one of the second container terminal currently under construction at Mombasa port. Despite the potential in the region the KPA has over the years restricted the volume of transit cargo to avoid congestion due to limited handling and storage capacities. “With the ever growing container and overall port cargo throughput in Mombasa, this new terminal will offer the much needed space to match the growth. The KPA also looks forward to increasing its capacity to handle transshipment cargo for the neighbouring ports which of late are struggling with serious congestion problems,” the KPA said in an update. Statistics by the port manager showed transshipment (handling of goods destined for other ports) has over the years remained at less than one per cent of the total cargo containers handled at the port.

Kenya is currently building the Sh28 billion second container terminal at Mombasa port to handle increased trade in the region. The new terminal is projected to handle 450,000 twenty-foot equivalent units (TEU) and rise to 1.2million TEUs by 2019.

total of 22.67 million tonnes of cargo were

Expansion of the Mombasa port is crucial to serving landlocked countries including Uganda, Rwanda and the Democratic Republic of Congo especially to handle increased importation of commodities like steel. The facility has been losing market share to the neighbouring Dar es Salaam port due to congestion.

significantly increased from 7.19 million tonnes

Although the port was designed to handle 250,000 TEUs per year, cargo volumes have grown exponentially to reach a record 1 million TEUs in 2015.

Uganda continued to dominate the transit

In 2015 the total cargo throughput handled at the port stood at 26.732 million tonnes compared to 24.875 million the previous year, reflecting a growth of 7.5 per cent. A

segment Rwanda registered the biggest growth

imports while 3.53 million tonnes were export commodities. Transit traffic to the East African hinterland in 2014 to 7.66 million in 2015. “Going by 2015 trends and statistics, almost all transit countries are increasingly using the port of Mombasa,” the KPA said.

• Flexible Collateral • Quick Approval • Flexible Repayment Terms Visit your nearest Equity Bank branch for more information

market share with her cargo that grew by 8.2 per cent from 5.52 million tonnes in 2014 to 5.97 million tonnes in 2015. In the transshipment of 23.7 per cent to record 291,924 tonnes in 2015 up from 235,912 tonnes in 2014.

Tel: +254 763 063 000, 16

Procurement & Logistics Management2016

@KeEquityBank

KeEquityBank


NEWS

Hatubagui mtu yeyote

Imperial Bank eyes Sh375.9m from sale of its Uganda stake

T

he collapsed Imperial Bank Kenya is set to receive about Sh375.9 million ($3.7 million) following the sale of its majority stake in Imperial Bank Uganda to Tanzania’s Exim Bank. The Central Bank of Kenya (CBK) on Tuesday disclosed that Imperial Bank Kenya’s 58.6 per cent stake in its Ugandan subsidiary was sold to Exim Bank for $6.8 million (692.4 million). The Sh316.5 million balance between the sale price and the amount to be remitted to the Kenyan unit will be used to cover transaction costs and liabilities of the Ugandan operation. The Kenya Deposit Insurance Corporation (KDIC), the receiver manager of the collapsed Imperial Bank Kenya, will receive the amount. “CBK is very supportive of BOU’s actions, exercising its statutory powers as the regulator in that jurisdiction and seeking an outcome that does not jeopardise financial sector stability,” the regulator said in a statement. “These shares in Imperial Bank (Uganda) Limited were sold

to Exim Bank (Uganda) Limited for the sum of $6.8 million in an effort to quickly recover funds for the benefit of all IBL depositors.” Exim Bank, one of the largest banks in Tanzania that also has subsidiaries in Djibouti and the Union of Comoros, appears to have acquired the stake at a considerable bargain. Imperial Bank Uganda was set up in 2010 at a cost of Sh448 million. It had grown to a network of six branches in the land-locked East African economy. The lender valued its investment in the subsidiary at Sh858 million at the end of 2014, when its gross assets stood at Sh7.9 billion. FTI Consulting, forensic auditors appointed by Imperial Bank shareholders, last month said that the sale of the majority shareholding was expected to raise nearly double what has been achieved. “Sale of the majority stake in Imperial Bank Uganda is estimated to raise Sh1.25 billion.

Imperial Bank Uganda was unaffected by the funding gap in Kenya and can be sold as a going concern,” the audit firm said in a report. Proceeds from this sale were to help fill the funding gap in the collapsed Kenyan entity, which is estimated at Sh38 billion. This week’s transaction has whittled down the bank’s assets, leaving shareholders and creditors with the lender’s Kenya assets to contend over. BoU placed Imperial Bank Uganda under receivership in October last year, following a similar action on the parent company by the Central Bank of Kenya (CBK) as accounts of fraud at the lender surfaced. Emmanuel Tumusiime-Mutebile-- BoU’s governor-- on Monday announced that the institution had terminated the statutory management of the bank following the transaction, whose value they did not disclose.

Pata bima ya afya kwa matibabu yote ya familia. A f y a Y e t u. B i m a Y e t u.

Eugene Ngugi, Managing Director, PIL

18

Procurement & Logistics Management2016


NEWS

R

PANORAMA GARDENS Own a part of the new Panorama Gardens, a chance to secure your future. Buy today and wait, no need to wait then buy. Secure your spot now

Uchumi wants SME supply terms reviewed

U

chumi Supermarket chief executive Julius Kipng’etich wants suppliers to drive the change of payment structure to ensure they get their money on time. He told small and medium enterprises being trained by the Common Market for Eastern and Southern Africa (Comesa) Business Council in partnership with the Kenya Association of Manufacturers, to form an organisation and set terms with retailers. The Uchumi boss said with one body, suppliers will have a bargaining power to come up with a Memorandum of Understanding with supermarket lobby Retail Trade Association of Kenya (Retrak). “Use the power of numbers, do not come as one to the big boys, sign an MoU with Retrak on a financing cycle so we can pay you in time because we need you to survive as a business,” he said in Nairobi yesterday. Delays in payment were at the centre of Uchumi’s troubles last year, which saw suppliers stop delivering goods to its stores owing to a Sh1 billion debt. Mr Kipng’etich said there should be a sustainable payment system that

20

With one body, suppliers will have a bargaining power to come up with a Memorandum of Understanding with supermarket lobby Retail Trade Association of Kenya (Retrak)

> 6 KM from Blue Post Hotel along Gatanga Road. > 9 minutes drive from Thika Town > Pure red soil > Ideal for immediate development > Divided into plots, Housing and Urithi Group of Schools International > Viewing everyday at 2:00 pm > Booking going on at an introductory price > 50 x 100 at Kshs. 1.49M and 100 x 100 at Kshs. 2.85M > Book with Kshs. 500k > Balance in 4 months installments without interest

would have an agreeable cycle, which will make it convenient for both suppliers and retailers. Under the current model, supermarkets have negotiated credit terms of between 30 and 90 days. However cash-flow problems mean that some supplies are only paid after the commodities have been sold, which may take longer. Some retailers have, however, shifted focus on leasing space instead, passing the burden of inventory to suppliers in return for prompt payments, a situation that ensures shelves are not left empty while attracting and retaining reliable customers. This model may lead to improved product quality since it attracts quality suppliers and eliminates carrying of dead inventory. Uchumi also operates a similar model for part of its floor space, allowing specialty shops to rent space on condition that they don’t sell foods and products sold by Uchumi to avoid direct competition.

Procurement & Logistics Management2016

For more information contacts on THIKA HEAD OFFICE URITHI CENTRE, SECTION 9 BEFORE CHANIA TOUTIST LODGE TEL : +254 714183001, +254 718442674 +254 722272539 P.o. Box 6485 - 01000,Thika.

NAIROBI OFFICE RIVER ROAD & RONALD NGALA JUNCTION ABOVE FAMILY BANK

NAKURU OFFICE KENYATTA AVENUE, SHOPPERS PARADISE 3RD FLOOR ROOM 8, OPP EQUITY BANK

www.urithihousing .co.ke | Email: info@urithihousing.co.ke


ial Service nc

s

Your Fi

rtner Pa

na

NEWS

BIMAS MISSION

VISION

“To professionally and efficiently provide financial services to customers through effective and affordable products to the satisfaction of all stakeholders”

“To be the leading financial services providers everywhere always”

OUR PRODUCTS »Business loan » Solar Loans »Development Loans »Group Project Loan

»Investment loan » Health Loans »Emergency loan »Afya Bora

»Consumer loan » Tank Loans »Women Loans » Agribusiness

»Micro-insurance Loan »Youth Fund loans »Savings »Dairy Loan

»Group Loans » Education Loans »Agri- business Loan » Maji Kilimo

OUR BRANCHES

South Africa to invest in ports, ocean economy

T

he South African government through the Transnet National Port Authority has allocated USD455m to construct new port facilities in South African to boost the country’s economy. According to statement from the Economic Sectors, Employment and Infrastructure Development on 8th March, existing ports facilities have been refurbished and maintained. The new port facilities have already created a record two hundred jobs. In a media briefing held in Cape Town, the cluster chaired by Rural Development and land Reform Minister Gugile Nkwinti said work to grow the ocean economy is gaining momentum. They said an investment of R9.2 billion has been realized through a conjunction between the government and private sectors that so the establishment of Saldanha Bay as an oil and gas hub. This is to be used over the next five years. 14 licenses have been issued for oil and gas exploration, drilling of two exploration wells for potential oil and gas at the South African coast. The investment in gas infrastructure has

22

“An amount of R353m over the next three years has already been unlocked in the ports of Durban and Cape Town for boat building infrastructure through incentives provided by government,” already started and is expected to contribute immensely to the country’s energy security. Work on the offshore supply is already in progress and will see Saldanha Bay attracting oil rigs for maintenance and repair. The surrounding communities are set to benefit through the secondary jobs created in addition to 500 direct and a further 3,000 indirect jobs created after the boat building sector was revitalized. “An amount of R353m over the next three years has already been unlocked

in the ports of Durban and Cape Town for boat building infrastructure through incentives provided by government,” the Economic Cluster said. R80 million has been set aside for the rehabilitation and maintenance of the proclaimed harbors in Gansbaai, Saldanha Bay, Struisbaai, Gordons Bay and Lamberts bay. This will as well include the establishment of three new harbors in Boegoebaal in the Northern Cape, port St Johns in Eastern Cape and Hibberdene in KwaZulu-Natal. This is expected to spur economic development as well as give a boost to the rural economic development. Investments of more than R400 have been unlocked with10 aquaculture farms already in production. The first of the harvests from these aquaculture farms has already been made in the Humburg, following the harvest of dusky kob (kabeljou) as well as the Siyazama Aquaculture Cooperative in Hamburg that has sold its first harvest of the dusky kob to the Cape Town Fish Market.

Procurement & Logistics Management2016

Embu Tel Aviv Plaza 068-31047

Matuu Free Market Store 061-2309316

Marimanti Next to Knut Offices 061-2309311

Tala Fiona Complex 061-2309319

Kerugoya Opposite Krep Bank 061-2309331

Murang’a Mugama Building 061-2309337

Maua Next to Forester Fashions 061-2309315

Kitui Fena House 061-23049397

Kiritiri Kamwenja Plaza 061-2309317

Kiambu 24/7 Building 061-2309334

Nanyuki Lesirai House 061-2309328

Kibwezi Taratibu Building 061-2309332

Nyeri Peak Business Centre 061-2309336

Meru Bimas House opp. Barclays Bank, Meru 202173193

Machakos Kinyali House 044-21924

Masii Peter Mulei Building 061-2309327

Mwea Jasper Park Building 061-2309312

Chuka Cipe Plaza 061-2309314

Kitengela Elsie House 061-2309321

Thika Equity Plaza 202118201

Mikinduri Mwimbi Building 061-2309330

Nairobi Branch eNKEi Centre, Ngara Rd. 020-8006302

Nkubu Office Kariigi Building 020-2636896

Nyahururu Office Mbaria Plaza 020-2637047

Makueni Double (K) Plaza 061-2309318

Mwingi Kasina House 061-2309320

Nakuru Branch Uchumi Business Centre 061-2309335/0722918261

Emali Next To Post Office 020-2636933

“The Microfinance Services Provider Of Choice”

HEAD OFFICE BIMAS complex off-SHELL Petrol station Majengo Area behind chiefs camp (Embu) The Executive Director BIMAS P.O. BOX 2299-60100 Embu Tel: (+254)068-31645, wireless (+254)0203570169 fax :(+254)068-31645 Email:info@bimaskenya.com Website: www.bimaskenya.com


COVERSTORY

MAERSK returns to UK port, Liverpool as Oil arm makes foray into Kenya Maersk Oil of Denmark made a $427 million deal with Kenya’s Tullow Oil in three exploration blocks located in the Lokichar basin The transaction puts Africa Oil in the enviable position of not requiring any additional equity financing prior to first oil and will allow the continent weather the current difficult oil price environment. 24

By Anthony Kiganda

M

AERSK is set to return to the UK port of Liverpool after more than a decade hiatus through its intra-European shortsea subsidiary Seago Line. From April, feeder specialist Seago Line will provide a direct service between the British Isles and Spanish transhipment hub Algeciras, where customers will be connected to markets in North Africa and the Mediterranean. The new Seago service will also call at the port of Dublin, representing the Maersk Group’s first ever direct call in the Irish capital. This will supplement the existing Latin American service to Cork operated by sister carrier Maersk Line and provide shippers with an alternative from the current feeder option from Rotterdam in Europe’s northern range. In a joint statement, Maersk Line and Seago said the new service will allow

Procurement & Logistics Management2016

for “easier access to other trades and helps sister companies Maersk Line and Safmarine deliver for their customers in the North West of England and Ireland”. They added: “Most notably, the new shortsea service creates a great opportunity for a West Africa product offering with a new transhipment option to connect both markets to Nigeria.” The service’s maiden call in Liverpool is scheduled for April 13 before calling Dublin on April 14. The loop will offer six-day transit times between Algeciras and Liverpool. A spokesman for Maersk told Lloyd’s List the size of the vessels Seago plans to use for the service will be confirmed at a later stage. The news that Maersk is set to return to Liverpool from next month will certainly be music to the ears of shippers in the northwest of the UK that have long called for greater liner coverage in the region. Not only will the offering provide them with access to new markets but it could also be a sign that the Danish shipping conglomerate’s container segment is looking to enhance its presence at the port. Last week, at a reception at the Houses of Parliament by the River Thames to promote Peel Ports’ Liverpool2 development, the port operator’s much-anticipated new £300m ($420.7m) deepwater container terminal, shippers urged the big global lines that currently call at ports in the southeast of the UK, namely Felixstowe and Southampton, to consider deepsea services to the northwest. They believe the new terminal — the first phase of which is expected to open around October this year — will provide the larger carriers with the ideal platform to add

Liverpool to its Asia-Europe network, as the port will soon be able to handle vessels of 13,000 teu or more, compared to the 4,000 teu ships today. Maersk Line was singled out in particular as one line they would like to see make the switch. In February 2016 its oil arm- Maersk Oil of Denmark-made a $427 million deal with Kenya’s Tullow Oil in exchange for half of its stake in three exploration blocks located in the Lokichar basin. The deal brings in Maersk as a partner in blocks 10BB, 13T and 10BA where it will own 25 per cent interest, scaling down Africa Oil’s stake to 25 per cent while Tullow retains a 50 per cent interest in the blocks. The farm-out arrangement was approved by Kenyan authorities last month but both companies had not reached a financial settlement. Africa Oil says the funds will be utilised to further exploration activity in the country as it prepares to commence pumping crude. Africa Oil will be eligible for an additional Sh7.7 billion ($75 million) from Maersk after it confirms the existing amount of crude in the three blocks, which is expected to take place this quarter. Once Tullow and Africa Oil agree on when to start producing oil, Maersk will also be obligated to pay the Canadian company an additional Sh41.3 billion ($405 million) depending on “meeting certain thresholds of resource growth”. “We are very pleased to have completed the Kenyan portion of our farm out to Maersk. We feel Maersk will be an excellent partner in terms of technical and financial strength and experience critical to moving the development project forward,” said Africa

Procurement & Logistics Management2016

Oil’s chief executive officer Keith Hill. The government is targeting to start crude production in September but in a recent update on its operations, Tullow Oil said that it would make a consideration on whether to invest in oil production and setting up of associated infrastructure in 2017. International oil prices have plummeted to about $30 a barrel due to oversupply and declining demand. The steep drop in crude prices has also seen oil and gas companies endure funding challenges, resulting in farm out deals both as a way to raise additional capital and also offloading exploration risk. Africa Oil is upbeat that the deal with Maersk will eliminate the need for funding from its shareholders. “This transaction puts Africa Oil in the enviable position of not requiring any additional equity financing prior to first oil and will allow us to weather the current difficult oil price environment should it continue into 2016,” He said.marketers today, there’s no reason to be wasting money and resources on approaches that don’t deliver results. By running linear regressions on a radio campaign, we can see the degree to which one independent variable affects another dependent one. For example, by regressing our daily radio advertising spend against our revenue in that listenership region, we are able to gauge just how. At FlySafair we have to keep our costs low in order to keep our fares low, and that means driving efficiency in all aspects of our business, from the floor cleaning solutions to the way we utilise our aircraft. Our marketing approach is no different.

25


FEATURE Despite the general lack of awareness about the benefits of leasing, the industry is now on the growth trajectory underscored by the rising number of firms specializing in leasing. The recent move by the government to adopt and embrace leasing has given the leasing industry the much needed impetus to expand. Vaell offers different types of leasing depending on the need of the client. For instance, the firm has Finance Lease and Operating Lease. The operating lease is further divided into two parts namely: Dry Operating Lease and Wet Operating Lease. A dry Lease is a basic lease granting full operational rights of the asset to the client while a wet lease covers additional costs like maintenance, fuel insurance, tracking and other fleet management services. Understanding the different types of leases is key factor for a contractor or corporate organization when deciding whether to buy or lease equipment.

Construction equipment leasing with Vaell Leading leasing firm in Kenya now banks on high demand for construction equipment to bloom. By Anthony Kiganda

W

ith the current boom in the construction sector in Kenya, demand for construction equipment is skyrocketing. But as demand surges, another challenge emerges; the financial muscle to buy equipment. Against this backdrop, most contractors have resorted to leasing which they say is an economical way of acquiring equipment at an affordable cost. Small to medium construction companies which aren’t able to outright purchase the expensive equipment they need, can enjoy affordable and appropriate earth moving equipment from a reliable lessor. Contrary to the days when the

26

Construction equipment leasing with VaellKey industry players cite the flexible terms of obtaining a lease as one of the major benefits that makes it attractive compared to loans.

leasing business was embraced with skepticism, the venture is now gaining traction in Kenya as well as the region. Leasing is considered important because it frees company’s cash flows by doing away with the need to spend more money by buying the required vehicle or equipment. Equipment lease doesn’t require a down payment; clients can obtain the assets they need without significantly affecting their cash flow. If you’re looking for an upfront way to finance your construction equipment and machinery, where you can simply hand it back at the end of the contract period, and you have no desire to ever own the equipment, then Vehicle and Equipment Leasing Limited (VAELL) can be

Procurement & Logistics Management2016

your choice of value. Since its incorporation in 2006, Vaell has curved out a niche for itself by offering tailor made services to its clients in Kenya and East Africa who include corporates and government institutions. Vaell, the leasing market leader in the region, acquired Club 101 company status in 2015 after winning the best in Transport award in the Top 100 KPMG/ Business Daily Survey in 2014. As a unique business practice, leasing has been accepted and embraced by leading multinational corporations around the globe as a sound model for asset acquisition. Equipment leasing is a convenient, cost-effective and hassle-free way of acquiring construction Equipment and there are many benefits of leasing equipment. It reduces the cost of construction as one does not need to purchase all equipment he needs. Construction equipment leasing with VaellKey industry players cite the flexible terms of obtaining a lease as one of the major benefits that makes it attractive compared to loans. Leasing is the new business strategy for construction firms in a bid to meet the growing demand and managing their operational costs by passing on intermediate services of vehicle maintenance to lessors like VAELL which is their area of expertise.

This helps construction companies to focus on their core mandate and hence become more productive. This is the same approach used by other key players is sectors such as telecommunication, manufacturing, logistics, health sector and governments in order to manage their cash-flows. Leasing allows companies to use equipment for a specified period of time while making monthly or quarterly payments as the lessor takes care of maintenance, insurance and tracking. This helps them evade the unnecessary vast capital expenditure in buying the vehicles. With leasing,there is no need to worry about lifespan and obsolescence. Through leasing contractors have the ability to use current technology since technology keeps upgrading. The tenant has the option of returning old machinery and obtaining a better version of the same equipment. The tenant therefore will remain competitive and productive for always employing latest technology. It is worth noting that leasing is not buying. Leasing allows a client to use equipment for a specified period of time while paying a fixed reasonable monthly fee. This helps the client to avoid huge capital initial expenditure and the money saved can be used to finance other expenditure.

Procurement & Logistics Management2016

Vaell has a comprehensive network with fullyfledged subsidiaries in five countries; Kenya, Uganda, Tanzania, Rwanda and Zambia and plans are underway to venture into 30 African countries by 2018 to meet demands from both multinational and local clients venturing into new areas. Currently Vaell has been able to lease to over 20 countries in the region. Clients can lease from VAELL anywhere within the continent since VAELL has strategic partnerships with other major leasing firms in the continent. Vaell enjoys a warm relationship with major auto motor dealers, financial institutions and banks to help it meet the unlimited market demand. Besides construction machinery, Vaell also leases other assets such as vehicles, IT equipment, office furniture, agricultural equipment and medical equipment. This has positioned Vaell a one stop shop where you can get any equipment you need at any given time. “Our value added services such as training operators on how to use machinery for safety reasons and maintenance has over the years continued making us the leasing company of choice,” reveals Paul Njeru Vaell’s Regional Managing Director. Asked about the future of the leasing industry in Kenya, Njeru says, “We project that the industry will grow exponentially. Currently, construction activities are booming in Mombasa County where the need for leasing is on high demand.” “To this end,” says Njeru, “we are coming up with innovative and tailor made products to serve our clients better even as we plan to spread our wings across the African continent.”

27


FEATURE

Zetech University soars high with new Procurement Course Vice Chancellor says Purchasing and Supply Management degree course will help tackle challenges in the procurement industry. By Sandra Dinga

W

hile other countries have tailormade degree courses to fit the requirements of the job market, Kenya stills lags behind. A skills mismatch has been blamed for the gaps in the job market. Despite the changing dynamics of different careers, universities have been reluctant to change their course offering, thereby sticking to the traditional courses which fail to produce the required personnel. In Kenya, public sector organizations use e-procurement to curb corruption and increase efficiency in purchasing and supplies services. It therefore comes as no surprise that the demand for qualified professionals in the areas of purchasing and supplies management has risen sharply to outstrip supply.

Filling skills gap

Zetech University prides itself as one of the few universities offering the course. But what

28

“With a degree in supply chain management, one learns how to become a strategic thinker, excellent analyst, effective communicator, and team leader who is focused on cost savings and increasing revenue.” motivated the newest university to come up with this programme? Professor Edwin Wamukoya, the Vice Chancellor of the university describes the move as an effort to help fill the skills gap in the procurement industry. “We realized that few universities were offering the course and

there was huge demand for skilled procurement officers. We established the course as a way of backing the efforts being made by other universities to enhance skills in supply chain management,” shares the professor. As it stands, few universities offer Purchasing and Supply management as a fully fledged course. In most cases, procurement is taught as a unit in other degree courses like commerce and business administration. The vast experienced educationist says that Zetech seeks to address challenges that procurement companies grapple with by churning out skilled labour in the area of purchase and supply management. Their focus, he reveals, will put emphasis on both theory and practical aspects of learning. “With a degree in supply chain management, one learns how to become a strategic thinker, excellent analyst, effective communicator, and team leader who is focused on cost savings and increasing revenue,” he notes

Procurement & Logistics Management2016


team has been able to register impressive performance at the national level. Recently, a basketball match pitting them and their bitter rivals Strathmore was aired live on Zuku TV channel. In recognition that some students have difficulties in paying school fees, the university offers scholarships to needy talented students in co-curriculum activities like sports and drama.

Workshops & Conferences KISM continually conducts CPD trainings for

Environmental champions

procurement and supply chain professionalson

The university participates in Corporate Social Responsibility activities aimed at conserving the environment. For instance, Zetech students are credited for cleaning Nairobi River and planting over 500 trees along Kipande Road in Nairobi. “The queen of environment in Nairobi is a student from Zetech and we are very proud of her,” boasts Prof. Wamukoya.

The course focuses on integration and partnerships necessary to meet customer needs on a timely basis. It also equips the learner with necessary skills to ensure products acquired are of high quality and are delivered in a costeffective manner.The degree course covers several aspects of supply chain management including principles of procurement, operation management and ethics in purchasing and supplies. Prof. Wamukoya notes that instilling ethics among learners of procurement will help curb the menace of corruption in this area. In 2007, the Public Procurement Oversight Authority (PPOA) estimated that procuring entities were buying at an average of 60% above the prevailing market price, an indicator that public procurement in Kenya does not reap the benefit of competitive pricing. Since inception, Zetech University has been strong in information technology and business related courses as it seeks to create more access to education. The institution recently unveiled its multi-million iconic structure in Ruiru in a strategic move intended to help it absorb more students.

Centre of excellence

According to Prof. Wamukoya, the fast rising institution will continue offering diploma and certificate courses as it seeks to expand its education portfolio. The university has cemented its place as an epitome of success through its courses in business and information technology at the diploma level. Apart from the degree course in supplies and purchasing management, Zetech has three other programmes namely Bachelor of Business Administration and Management (BBAM), Bachelor of Science in Information technology

30

(BSCIT) and Bachelor of Business Information Technology (BBIT). In a bid to ensure that their students are ready for the job market, the university has partnered with various procurement companies for internships. This, Prof. Wamukoya believes, will ensure that graduates are competent in the procurement industry. “Our programme includes three months of industrial attachment to enable students appreciate the application of procurement knowledge in industrial related projects,” he quips. Zetech seeks to establish itself as a centre of excellence by offering job specific courses as opposed to various mushrooming colleges that offer several courses that are similar. The institution which became a fully fledged university in August last year says their transition into university will by no means compromise the quality of education. Prof. Wamukoya discloses that the university has devised a quality assurance committee that looks into the relevance of the programmes they offer. The committee looks into class attendance by lecturers, setting of examinations and completion of the syllabus. There have been concerns that middle level colleges are swiftly transforming into universities creating technical skills gap.According to Prof. Wamukoya, the trend is driven by need for expansion. However, he assures that Zetech will continue to teach technical courses. Zetech University is not only a centre for academic excellence but also a co-curriculum hub. The institution has participated in major sporting events like football and basketball with brilliant results to show for it. The basketball

In 2014, the university produced a participant in the Miss Universe competition in the United States of America. According to Prof. Wamukoya, such milestones in the academic and co-curriculum activity has continued to place the institution on a trajectory to becoming the University of Choice for thousands of students. As way of deepening their participation in community work, Zetech launched a Rotaract Club wth the help of Rotary International. “The Rotaract has reinforced the university’s purpose to deliver timely and impactful community service as a way of promoting peace, economic and social growth in the society,” states the Vice Chancellor. “We have identified the areas of health, environment, community engagement, and economic empowerment as key pillars to give back to the society. With the support of Rotary Club, we are convinced that our purpose in these areas will be strengthened,” he adds. Through the club, Zetech students participated in the provision of sanitary towels to girls in Kilifi County and Kibera slums, a gesture that was greatly appreciated by residents. The institution regularly participates in town cleaning activities in Ruiru and Githurai. The university also holds a yearly beauty pageant competition. The winners referred to as Mr and Miss Zetech winners are involved in several community activities which are of benefit to society. Although a flourishing institution, Prof. Wamukoya believes that the sky is the limit and that there is always room for improvement. He urges the youth to join Zetech in order to gain quality education. “There is no end to learning. I urge both the youth and the old to embrace education. At Zetech, our school fees are affordable to enable aspiring learners to join us,” he ends.

Procurement & Logistics Management2016

various themes. The workshops themes derive from challenges identified, from e-mail surveys, and surveys conducted at previous trainings and other public forums convened by the institute. The courses are developed through extensive local and international based research aimed at providing modern and practical solutions to challenges to supply chain challenges while equipping participants with skills and best practices, to enable them perform effective and

efficiently

and

contribute

towards

achieving organization goals.

K

ISM is a national body for professionals in the practice of procurement and supplies management in Kenya. The Institute draws its mandate from the “Supplies Practitioners Management Act No.17 of 2007.” This Act provides the legal framework within which the Institute is established and operates as a corporate body promoting learning, development of best practices, and application of the same to the practice of procurement and supply chain management. This legal framework establishes the following structures to support operations of the institute: • The governing “Council” comprising seven elected, qualified and experienced supplies practitioners. The Permanent Secretary of the Treasury and the Director General of the Public Procurement Oversight Authority are appointed through this statute to the Council.

“Staff of the Institute” who are responsible for the day to day management of the affairs of the institute The Examinations Board which is responsible for establishment and administration of a national procurement and supplies syllabi and examinations The “Registration Committee” admits new members, and oversees development and promotion of membership services which include capacity development; The “Disciplinary Committee” is the custodian of the professional code of ethics, it has the responsibility of promoting compliance to the code through sensitization activities and enforcement of the code in line with the Act.

In House Training We specialize in design and delivery of customized procurement and supply chain training programs. Our team of consultants and trainers are highly experienced supply chain professionals with extensive knowledge and experience from private, public and NGO sectors. Our in-house training programs are cost effective and designed to increase overall organizational effectiveness through application of tested procurement and supply chain management concepts.

Nation Centre, 12th Floor Tower B, Nairobi, P. O. Box 30400-00100, Nairobi Telephone: +254 (020) 2213908-10 / (020) 3505992 / (020) 2635807, Fax: +254 (020) 2213911 Mobile: +254 (0)721244828, 733 333226, 717 004842,Email: admin@kism.or.ke


REPORT who oversees the security firm, adds that the world was now in a permanent struggle with terrorism. While the attacks in Paris were socalled soft targets, he says it prompted many global corporations to re-evaluate their security plans.

In Tanzania, Defence and National Service minister Hussein Mwinyi announced that the Tanzanian People’s Defence Force (TPDF) has been allocated $808 million to strengthen national security operations, which is $188 million more than last year.

According to the Global Terrorism Index (GTI), the cost of containing terrorism last year was $117 billion. Institute for Economics and Peace, which tracks the cost of terrorism in the world, notes that the cost of preventing terrorism is more than the cost of terrorism itself. The institute observes that the cost of preventing terrorism jumped 61% to a record $53 billion. The Global Terrorism Index singles out ISIL also known as ISIS, and Boko Haram, as the most perpetrators of terror deaths in the world.

The government’s spending on security comes amid Tanzania’s concerns about several regional militias and armed groups which are posing new national security threats along the western border with the eastern provinces of the Democratic Republic of Congo (DRC).

Russia has announced a US$50m reward for any information on its airliner that it believes was downed by a bomb. The US government recently announced a reward of US$27 million for any information leading to the arrest of Alshabaab commanders, an East Africa al Qaeida affiliate that has caused havoc in the region in recent times. Closer home in Kenya, billions of shillings are being estimated to be spent on homeland security and other measures which continue and are expected to increase following the recent incidents of terror attacks in Paris, Egypt and Beirut.

By Sandra Dinga

Special Report: Counting the Economic Cost of Fighting and Preventing Terrorism Government expenditure on security have surged amid threats from emerging terror organizations. We look at how fighting and preventing terrorism is becoming a costly affair

32

Procurement & Logistics Management2016

W

hen France was attacked by suspected Islamic State militants in late 2015, mayhem and rampage spread across Paris the capital of the country. The attack was launched only two weeks after the Russian plane crashed in Egypt killing all the 224 passengers and crew onboard. France and other countries in the world are now forced to contend with the rising cost of boosting security. Companies and multinational corporations have not been spared either as they now have to spend more money in a bid to thwart future attacks. “It will need huge resources to combat the menace,” says Daniel Karson, Chairman of global security firm Kroll Associates. Karson,

In its 2015-2016 budget Kenya announced 223.9 billion shillings - a 12 per cent increase from the previous financial year had been set aside to foster security. Treasury Minister Henry Rotich said that the extra money will help buy more vehicles and equipment for security forces. About 112.5 billion shillings will go to the army and intelligence gathering, while 102.4 billion shillings will be allocated to the interior ministry responsible for the police. In addition, Rotich proposed 5.2 billion shillings to boost tourism. Tourism in Kenya generates about $1 billion of foreign revenue for the government, second to tea exports. The industry has been hit by a series of attacks by Islamist militants over the past two and a half years that left at least 516 people dead. Tourist arrivals fell 11 percent in the year 2015 because of the killings. Angus Downie who is head of economic research at Ecobank Transnational says that Kenyan authorities are aware that further efforts need to be made to bolster security, particularly as the impact from increased insecurity has undermined the tourism sector that is a major foreign income earner and employment. It is a move that has been adopted across the East Africa nations.

Procurement & Logistics Management2016

He said the increase in defence spending is also aimed at ensuring Tanzania can defend itself from home-grown and regional terror groups like Al Shabaab, which has repeatedly attacked Uganda and Kenya. In Uganda, defense spending has stayed over 2 per cent of GDP rising to 4 per cent in the last two decades, even as the rest of the region made deliberate efforts to cut their spend in the same period. However, Data released in 2014 by the Stockholm International Peace Research Institute (Sipri) shows that Tanzania still lags behind its East African partners in military spending. The country spent just $380 million since 2011. The report reveals that Uganda and Burundi led the rest of East Africa in military spending. Professor, Noah Midambo from KCA University observes that with increased militancy in the region and threats from regional and international terror groups, security expenditur can only rise. “The war with terrorism is a long war; everyone must be prepared to understand that this struggle is indefinite,” notes Prof Midambo.

Extra money will help buy more vehicles and equipment for security forces. About 112.5 billion shillings will go to the army and intelligence gathering, while 102.4 billion shillings will be allocated to the interior ministry responsible for the police.

33


TIPS performance, a history of supplier performance is necessary for future effective decision-making and sourcing strategy formulation. Key measures of quality include percent acceptable vs. rejected lots, parts per million defective, warranty percentages, reliability, process capability ratios, percent parts rejected, and internal/external customer satisfaction. Practices also included developing a cooperative approach to setting specifications, listing of “problem” suppliers, definition of target quality levels, employing common measurement systems across strategic business units, and prequalifying suppliers. Once assessed, companies often focused on consolidation of volumes with

fewer suppliers, in order to eliminate those suppliers incapable of meeting expectations. Supplier databases often pinpointed those suppliers consistently unable to perform, resulting in fewer suppliers getting more of the business. This “first cut” of reducing the supply base is often fairly easy to implement, as non-performance is easy to identify once an assessment system is in place. Almost all of the companies who responded have already gone through several rounds of supply base reduction, and are closing in on optimizing their supply base to an appropriate number of suppliers. Many of these practices were implemented during the 1980s and early 1990s.

After seeking these initial improvements, organizations may then move on to improve the performance of those suppliers remaining in an optimized supply base. Companies employed a diverse set of supplier development strategies. Moreover, these approaches can be classified into supplier-specific improvement projects, or efforts to improve the capabilities of the entire supply base. Further, initiatives either focused on product-level or process-level improvements. In implementing supplier development, our research found that companies belong in one of two categories: those firms focusing on Strategic Supplier Development, or Reactive Supplier Development.

Want to improve your supply chain performance? Start with your supplier By Sandra Dinga

C

ompanies now know that suppliers of critical goods and services can provide major competitive benefits, in the form of lower costs, improved quality, on-time delivery, technological innovation, and customer service. As firms seek to globalize their businesses, they must also bring with them a capable supply base that can likewise support these global initiatives into new markets and businesses, as well as drive costs out of the supply chain. One strategy that has been employed by many companies including Honda, Daimler Chrysler, John Deere, Toyota, and other manufacturers is to help their supplier improve through a strategy Known as “supplier development”. A formal definition for this strategy is: “Supplier development is a bilateral effort by both the buying and supplying organizations to

34

“Supplier development is a bilateral effort by both the buying and supplying organizations to jointly improve the supplier’s performance and/or capabilities in one or more of the following areas: cost, quality, delivery, timeto-market, technology, managerial capability, financial viability and environmental.”

jointly improve the supplier’s performance and/ or capabilities in one or more of the following areas: cost, quality, delivery, time-to-market, technology, managerial capability, financial viability and environmental.” In employing this definition, it is important to identify the hierarchy of strategies that must be established prior to deployment of these practices. Firms often begin the process of continuous improvement of their processes through extensive internal training programs to educate company and purchasing personnel in basic TQM principles. Training is often carried out by quality department managers, using two to three day seminars on continuous improvement, customer satisfaction, basic statistics and process capability. These initiatives later mature into a focus on the goal of assessing supplier performance. Organizations at this level realized that in order to improve material quality and

Procurement & Logistics Management2016

Procurement & Logistics Management2016

35


TIPS NEWS AROUND THE WORLD

How to estimate building costs Below are tips to help you plan your building construction budget. 1. Contact house builders Get in touch with contractors who build houses that are similar in size, style, quality, and features to the home you want. The contractors will tell you how much per square foot they usually charge for home construction. More importantly contractors can also give you an idea of what your house might cost. However, it is recommended that you ask to know exactly what is included in the price. Most builders will give you a list showing the materials they will use. 2. Count the square footage Look at a newly built home that is similar to the one you want. Get the price of the home,

36

Keep in mind that high quality finishes significantly increases the construction costs subtract the price of the land, and divide that amount by the square footage of the home. For example, if the house is selling for Sh2, 500,000 and the land costs Sh500,000, then the construction cost is around Sh2, 000,000. If the home is 2,000 square feet, then the cost per square foot is Sh1,000. It is recommended that you compare several new homes in your area to get an approximate square footage price. 3. Quality finishes Keep in mind that high quality finishes significantly increases the construction costs. Building a modest house in Kenya goes for Sh 25,000 per square meter, although a larger home may have a lower square footage cost

than a smaller home. The average size of a 1 and 2 bedroomed unit is 35 and 60 square meters respectively. 4. Be keen on the features The features of the house you want to build greatly influences the construction cost. For example, increasing the size and number of windows, use of vaulted ceilings and high roof pitches can greatly increase the cost of a home. 5. Size of the house The size of your house is also an important consideration. This is because the cost per square foot is often higher for a small home than that of a larger home. When putting up a bigger house, the cost of pricey items such as a bathroom or kitchen is distributed over more square footage. In fact, building a onestory house usually costs more than putting up a two-story house as the latter will have a smaller roof and foundation. Besides, ventilation and plumbing are more compact in two-story homes. Lastly, you can save a lot of money by estimating your construction expenses before you select your final blueprints.

Procurement & Logistics Management2016


ADVERTISERS’ INDEX Alios Kenya IBC BIMAS Group 21 Century DT Microfinance 11 CPF Financial Services 35 Equity Bank 15 Kenya Institute of Supplies Management

29

Lap fund 9 Mabati Rolling Mills OBC National Hospital Insurance Fund

Proximity

17

Partnership

Innovation

Excellence

Orange Kenya 33 Remu Microfinance Bank 13 Safaricom IFC Urithi Housing Co-op Society Ltd

OPERATING LEASE

19

Zetech University 27

We will take good care of your equipment The operating lease solution gives your business full use of an asset while you avoid the risks associated with the ownership of equipment such as depreciation, maintenance, replacement, obsolesces and asset disposal. An operating lease acts as true hiring arrangements where the full rental is treated as an expense and allows equipment to be taken off the balance sheet for accounting purposes. Alios Finance Kenya limited is an independent lessor offering our clients various options in the acquisition of assets.

Benefits of Operating Lease • 100% financing • Access to the latest equipment and technology without the associated cost of ownership. • Hedge against equipment obsolescence • Hassle-free delivery and start up of equipment • No worries about disposing of equipment • Preserve customer credit lines • Enhanced return on assets and return on equity ratios as operating lease is not reflected on the balance sheet

By understanding our client business and assets needs, we offer leasing solutions that appeal to our clients under one roof.

To advertise with us: Send Email to sales@proclogistics.com or contact us on +254 (20) 440 4488 for more information. Procurement & Logistics Magazine

@ LogisticsProc

Salient Features • Alios Finance provides equipment on short and long term rentals • Alios Finance has the flexibility to adapt its products according to customer requirements by offering tailor made solutions • The equipment is rented along with an entire range of services such as fleet management, maintenance, repair, replacement, upgrading and logistics’ through our network of partners • Lease payments are 100% tax deductible thus reducing the rental cost of the equipment

With You We Walk The Extra Mile ....

Products

• Trucks and trailers • Commercial Vehicles • Generators • Agriculture equipment • Communication Equipment

Alios Finance Kenya Limited Timau Plaza (7th floor), Off Argwings Khodek Road P.o. Box 25382- 00100, Nairobi, Kenya Tel: +254 711 287 856 kenya@alios-finance.com www.alios-finance.com


Procurement and Logistics Magazine March-April 2016 issue  
Procurement and Logistics Magazine March-April 2016 issue  

Eastern Africa Premier Supply Chain Magazine

Advertisement