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PROCUREMENT & LOGISTICS

Africa’s Leading Supply Chain Journal

August 2017 Issue No.: 13

KSHS. 400.00 TSHS. 8,000.00 USHS. 12,000.00 RFR. 4,000.00 USD. 5.00

Management

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Kenya manufacturing sector set for major change (KAM) Chairperson

Kenya Railways releases new schedule for Madaraka express for Nairobi commuters

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World Bank approves $345 million loan to Dar es Salaam Maritime Gateway Project

South Africa, Egypt, Kenya, Morocco and Nigeria remains Africa’s key hub economies


Editor’s note PUBLISHER Proc & Logistix Consult Limited

Dear Reader,

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elcome to another edition of Procurement and Logistics Management Magazine as we continue to look at supply chain business industry and Kenyas manufacturing sector.

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Procurement & Logistics Magazine @ LogisticsProc EDITOR IN CHIEF Okumu S. Biko SUB-EDITOR Malachi Motano GRAPHIC DESIGN Amon Kibet + 254 711 589 228 AUDIENCE DEVELOPMENT MANAGER Emily Martin WRITER Faith Nyaberi EDITORIAL OFFICES Proc & Logistix Consult P.O BOX 40619 00100 GPO Nairobi-Kenya, Mobile + 254713727860 Tel +254 0204404488/02044002479 info@procurementandlogisticsonline.com www.procurementandlogisticsonline.com ADVERTISING For information on advertising in future Issues of the magazine, please contact: OKUMU STEVE BIKO +254 721 986284 E-MAIL: adverts@procurementandlogisticsonline.com SUBSCRIBER CUSTOMER SERVICE

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Manufacturers are championing inclusive and broad-based economic growth policies to transform the sector which has experienced stagnated growth over the years The Magazine features the Chairperson of Kenya Association of Manufactures. The significance of industrialisation to world economies owe a great deal to the role of manufacturers and she maintains that Kenya has everything it needs to transform into an industrial hub by 2030. Away from manufacturing the government of Kenya commissioned the fifth International Airport, opening up the northern tourist circuit to help increase the number of visitors in the country. Isiolo International Airport (LAPSSET project) ; is expected to promote development in the vast region by unlocking the region’s economic potential-, is strategically located for miraa (khat), beef and fresh produce exports from Kenya’s Lower Eastern region. Energy matters: Kenya is offering geothermal energy exploration consultancy services to Rwanda after its drilling of two wells failed in 2015. The consultancy services to be offered by scientists and engineers from the Kenyan governmentowned company, Geothermal Development Company (GDC) earned Ksh11.9 million (about $114,000) from consultancy to regional economies in 2015/16 financial year. Business model of franchising is also explained with examples of local companies venturing into this either by Traditional or Product Distribution model or Business Format Franchising. On corporate social responsibility, Kenya Pipeline Company (KPC) paid tuition fees for 227 needy students from the Thange oil spill area as part of the company’s corporate social investment program. KPC Foundation paid out cheques of Kshs 1 million to 104 poor children from Thange and today we are supporting an additional 227 needy children to access education and achieve their dreams. We also look at a Miebach’s report indicating why Africa is the least preferred nearshoring destination as production is being relocated to industrialized countries, get to know the comparative advantage Asia has over Africa. On the regional front get to know why Kenya, South Africa, Egypt, Morocco and Nigeria remains Africa’s key hub economies. According to the World Bank’s latest edition of Global Economic Prospects Ethiopia’s GDP is forecast to grow by 8.3% in 2017 as global growth is projected to be 2.7% making it the best worldwide. For these and many more stories, grab a copy of the Magazine for your own digests.

ENJOY YOUR READING

Okumu S BIKO

CEO & Chief Editor


CONTENTS BRIEFS 4.

M-Visa, the new free domestic mobile money transfer in Kenya 5. KPC’s empathy to Thange oil spill victims6. 6. Wal-Mart Will Punish Its Suppliers for Delivering Early 7. KAM and CRA launches a portal for easy access to Kenya’s devolution data 8. Kenya Railways releases new schedule for Madaraka express for Nairobi commuters. Kenya offers consultancy services to Rwanda 9. Kenya Airways Group booking portal launched 10 Electric and Hybrid cars in Kenya 11. India’s GST Tax overhaul ‘reshaping logistics sector

Flora Mutahi Chairperson (KAM), “Manufacturers set to transform the sector.” 18

Warehousing

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Seacom’s advice for Ransomware prevention 21

ECONOMIC OUTLOOK

Britex Air offers two-return flights on Nairobi-Kisumu route 36

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REPORT 30. Franchise business model taking roots in kenya

EVENTS

ENERGY

33. Africa’s export markets set to boom in the wake of ports expansion

35. Lexo Energy to open up petrol stations in Kenya

PORTS

DEVELOPMENT

39 Government reviving Kenya National

23 Coal plant contract in Lamu extended to 2018

Shipping Line to tap Ksh 300B potential

SUBSCRIBE NOW! Proc and Logistix Consult Ltd, the publisher of Procurement and Logistics Management, invites subscriptions from professionals, international organisations, individuals and the academia. The subscription is available on an annual basis at the rate of Kshs.4,800 for 12 issues of Procurement and Logistics Management. Cheques made payable to Proc & Logistix Consult Ltd, M-PESA Paybill: Buy Goods, 492161. Welcome.

PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13

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BRIEFS

M-Visa, the new free domestic mobile money transfer in Kenya

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onsumers can use mVisa to send money directly from their bank to a recipient’s bank account regardless of whether they use a smart phone or feature phone.Kenyans will be able to pay, send or receive money domestically without any transaction fees using mVisa. mVisa, a QR code-bade new mobile-payment service that is intended to accelerate digital commerce in Kenya and across Africa. Visa first introduced the service last year in India.

Visa made partnership with top banks in Kenya which include; • • • • • • • •

Barclays Bank Cooperative Bank Family Bank KCB Bank National Bank of Kenya NIC Bank Prime Bank Standard Chartered Bank They’ll be able to send money for free. Other banks, either live or about to go live with mVisa, include Diamond Trust Bank and Stanbic.

Visa Sub Saharan Country Manager Andrew Tore said smaller merchants in particular have realized that they no longer have to invest in expensive point of sale infrastructure as mVisa gives them the freedom to accept bank to bank payments in a convenient, secure and affordable manner. “The mVisa implementation in Kenya has benefited from the Visa Developer Platform allowing all partner banks the ability to integrate the mVisa Advanced Pediatric Life Support (APLs) directly into their mobile banking apps speeding up the banks that have been able to roll out the mVisa solution in Kenya,” Tore said. MVisa also will now be accepted at thousands of merchant locations across the country including Nakumatt, KenolKobil, IMAX Theaters, EatOut, Zucchini, Little Cab, Kenya Airways, and Bata. It will also soon be accepted at thousands of merchants aggregated through Direct Pay Online and Jambo Pay, enabling an even easier e-commerce experience for Kenyans. Transactions are processed via Visa’s global network, VisaNet, applying the scale, security and reliability of Visa to mobile payments in emerging markets.

Steps for registering on mVisa

The mVisa takes on M-pesa and Pesalink with free mobile money transfer. This new initiative by mVisa could hamper such profit margins for some of the already existing sector players, and Visa knows it. mVisa will now also be accepted at a number of merchant locations across the country through Direct Pay Online and Jambo Pay on their mobile banking. These features are intended to accelerate financial inclusion, a core objective of both the Kenyan government and Visa. mVisa is now live in Kenya, India, Rwanda and Egypt with plans to launch in Nigeria, Uganda, Tanzania, Ghana, Indonesia, Kazakhstan, Pakistan and Vietnam underway. Speaking during a client’s event at a Nairobi hotel, ICT cabinet secretary, Joe Mucheru said mVisa mobile First approach is ideal for the country’s ecosystem where mobile penetration is at a staggering 88 percent. “mVisa customers will be able to make card-less purchases or send and receive money using their mobile phones,” said Mucheru, adding that the burden of carrying several cards and other instruments is no more and that customers will cherish the convenience and freedom of the secure electronic transactions. “I congratulate Visa for creating this platform and partnering with Kenya’s leading banks and payment facilitators such as Direct Pay Online and JamboPay to enable thousands of merchants to accept mVisa payments. The CS said he is confident and has faith in the leading international brand Visa partnering with Kenya’s banking sector and the economy at large.

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• • • • •

Register for mobile banking and download your bank’s mobile banking appor upgrade your existing mobile banking app. Open the app or access your bank’s USSD platform and select mVisa. Set an mPIN, if required. Select your desired Visa card to link Steps for using mVisa

Open your mobile banking app

• • • • • •

Select mVisa. Scan the merchant QR. Enter amount if required. Or, the amount you owe may automatically appear! Confirm payment. Receive payment confirmation For USSD, simply access your bank’s USSD platform, enter merchant ID, amount and pay!

PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13


BRIEFS

KPC’s empathy to Thange oil spill victims

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PC Foundation of Kenya Pipeline Company(KPC) paid tuition fees for 227 needy students from the Thange oil spill area as part of the company’s corporate social investment program. KPC Foundation manager Bernice Lemedeket said that KPC paid out cheques of Shs 1 million to 104 poor children from Thange and today we are supporting an additional 227 needy children to access education and achieve their dreams. The tuition fees formed the second batch of KPC bursary scheme for needy students from Thange Valley in Kibwezi East Constituency which experienced an oil spill two years ago. The bursary beneficiaries have been drawn from various institutions in Kenya ranging from secondary schools, universities and colleges. “The beneficiaries were selected by representatives from the local community who constituted a vetting panel. So the process was transparent, open and fair. We wish the learners every bit of success in their studies,” said Bernice. Over the last two years, KPC has spent over Shs 24 million in support of the community through provision of clean water, food aid, and bursaries. The compensation began in March 2017 after KPC’s insurer, CIC Insurance, finalized assessments on the first batch of claims made by 278 residents. Over 200 Thange residents have received compensation from the Kenya Pipeline Company in relation to the 2015 oil leak on its aging 39 year old pipeline. So far, over 4,000 residents have applied for compensation and about 500 of these have been processed whereas the rest have been asked to provide further information.

CIC’s investigators and assessors finalized assessment on livestock losses and are still undertaking assessments on the other three categories as well as additional claims on livestock losses. Mr Joe Sang the Managing Director of KPC, assured the residents that the payments will be fast tracked and urged the residents to provide accurate information to enable the insurer process their claims quickly. “For us to complete the compensation process soon, you should always provide the correct information accompanied by relevant documents so that our insurance company can process your claims quickly,” he said. The ageing Nairobi-Mombasa pipeline passes through Thange. The 14-inch Mombasa-Nairobi pipeline was constructed in 1978 and has been in operation for 39 years, way beyond its 25 year useful life. Being the only pipeline that feeds the country and its neighbors, it has to be kept in operational state through constant repairs and inspection. But the 450km Mombasa – Nairobi pipeline is currently being replaced to meet the region’s future petroleum needs. The new line, a Vision 2030 Shs 48 billion project, will include fire-fighting systems in new stations, installing energy efficient equipment and pipeline monitoring technology to ensure easy spotting of damages on the line. The project is well underway and will be ready for commissioning this year. The new pipeline will improve the safety, reliability and efficient delivery of product to KPC’s customers and reduce the losses and damages caused by spillage on the current 14” Mombasa -Nairobi pipeline.

Claims from the Thange residents were in four categories namely: • • • •

Livestock losses Crop losses Medical expenses Water expenses

The beneficiaries were selected by representatives from the local community who constituted a vetting panel. So the process was transparent, open and fair. We wish the learners every bit of success in their studies,”

PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13

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BRIEFS

Wal-Mart Will Punish Its Suppliers for Delivering Early

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ong known for squeezing its vast network of suppliers, Wal-Mart Stores Inc. is about to step up the pressure. The focus this time is delivery scheduling, and the company’s not messing around. Two days late? That’ll earn you a fine. One day early? That’s a fine, too. Right on-time but goods aren’t packed properly? You guessed it fined. The program, labeled “On-Time, In-Full,’’ aims to add $1 billion to revenue by improving product availability at stores, according to slides from a presentation obtained by Bloomberg, and it underscores the urgency Wal-Mart feels as it raises wages, cuts prices and confronts a powerhouse rival in Amazon.com Inc. that’s poised to grow with its planned purchase of Whole Foods Markets Inc. “Wal-Mart has to find efficiencies wherever it can,’’ says Laura Kennedy, an analyst at Kantar Retail. “They’re trying to squeeze and squeeze and squeeze.’’ The initiative builds on progress Wal-Mart has made in reducing inventory and tidying its 4,700 U.S. stores after the back rooms became so cluttered it often stored surplus products in cargo trailers parked out back. Wal-Mart isn’t the first big retailer to tighten the deadline for vendor deliveries. Target Corp. implemented a similar policy last year as part of a broader supply-chain overhaul. But Wal-Mart’s vast logistics network of more than 150 U.S. distribution centers dwarfs that of any other retailer, and the company typically accounts for a sizable chunk of its suppliers’ sales: 27 percent for bleach maker Clorox Co., for instance. Fast-Turning Items The new rules begin in August, and the company said they will require full-truckload suppliers of fast-turning items groceries, paper towels to “deliver what we ordered 100 percent in full, on the must-arrive-by date 75 percent of the time.” Items that are late or missing during a one-month period will incur a fine of 3 percent of their value. Early shipments get dinged, too, because they create overstocks.

Suppliers Seek Government Intervention

By February, Wal-Mart wants these deliveries to be on-time and in-full (known as “OTIF”) 95 percent of the time. Its previous target was 90 percent hitting a more lenient four-day window. “Variability is the No. 1 killer of the supply chain,’’ Kendall Trainor, a Wal-Mart senior director of operations support and supplier collaboration, said in a presentation to vendors earlier this year. Those variations can be extreme: OTIF scores for Wal-Mart’s top 75 suppliers including Procter & Gamble Co. and Unilever had been as low as 10 percent, according to Trainor’s presentation. And not one had reached the 95 percent long-term target. Unilever declined to comment. Damon Jones, a spokesman for P&G, said his company and Wal-Mart “share a joint commitment to superior consumer service including on-shelf availability.” Aggressive Goals “The goals are aggressive and will require new ways of working,’’ warned a slide at another Wal-Mart presentation to suppliers. A company spokesman was more sanguine, saying the retailer is “working closely with our vendors to help reach these targets. We know that when products we’ve ordered arrive on time, it results in happier customers.’’ That’s been a challenge, though. Under previous Chief Executive Officer Mike Duke, stores suffered from a lack of manpower to keep shelves stocked, and missing products drove customers to rivals including Dollar General Corp., Walgreens Boots Alliance Inc. and German discounter Aldi.

Packages move along a conveyor belt inside a Wal-Mart Stores Inc.

When Doug McMillon became CEO in 2014, one of his goals was to improve what the company calls “on-shelf availability.” It has gotten better, although Wal-Mart declined to provide specific figures. While big suppliers should be able to invest in fancy inventory-management systems to get up to speed with the new rules, smaller businesses will feel more pain. Some don’t even know what “OTIF’’ stands for, according to Colby Beland, vice president of sales at CaseStack, a logistics provider that bundles supplier shipments for delivery to retailers’ warehouses. Brisk Business That confusion has created a brisk business for consultants, who are busy crisscrossing the country delivering tutorials on the program. “OTIF is the hottest subject out there right now,’’ according to 8th and Walton, a consultant based in Wal-Mart’s hometown of Bentonville, Arkansas, that has conducted OTIF seminars in New York; Portland; Ontario, Canada, and other cities. “Everybody has come to the stark realization that OTIF is here and it’s real and they better get ready for August,’’ Beland says. The program is the latest chapter in Wal-Mart’s history of badgering suppliers to improve efficiency and performance. It was the first big retailer to embrace bar codes in the early 1980s to track inventory and sales, mandating precise locations on packages for easy scanning. Vendors that refused were kicked off the shelves. “Suppliers went crazy at first, but they all figured out how to implement it and it helped them as much as it helped Wal-Mart,’’ says Dale Rogers, a logistics professor at Arizona State University. “This is just the next one of these things.’’

Scoring System

In some cases a problem will be Wal-Mart’s fault, so the retailer has developed a scoring system that breaks down reasons for non-compliant deliveries and will fine suppliers only if they’re responsible. If suppliers don’t agree with the fine, too bad: Disputes “will not be tolerated,’’ Wal-Mart says.

SOURCE: BLOOMBERG

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PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13


BRIEFS

KAM and CRA launches a portal for easy access to Kenya’s devolution data

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he portal will centralize devolution data onto a single platform Kenya Association of Manufacturers (KAM) in partnership with the Commission on Revenue Allocation (CRA) with technical support from European Union (EU) have today launched The Integrated Devolution Data Portal (TIDDP) aimed at centralizing devolution information onto a single platform. The portal is an interactive platform for information sharing between County Governments, Constitutional Implementation Bodies, the public and other stakeholders providing a unified space for users to easily identify, retrieve and use devolution information. Launching the portal today, ICT Cabinet Secretary, Mr. Joe Mucheru noted that the Government is keen to provide relevant information from all counties to investors for decision making and encourages accountability of public officers. “The portal attests the government commitment to freedom to information. Citizens have the right to information owned by the state. This information will include County legislation, public participation

forums, revenue laws, equitable share expenditures essential in decision making particularly for investment and business,” added Mr. Mucheru. Speaking at the launch, CRA chairperson, Dr. Jane Kiringai stated that, “The portal aims at collecting and aggregating resources and simplifying access to data, news, county websites, and task performance tools through single-log-in profiles.” Devolution in Kenya still faces challenges including overdependence on the national government for finances, unstructured mechanism to sustain investment attraction to counties, inconsistent county regulatory frameworks and lack of a national framework to guide counties in policy and legislations affecting business. KAM Head of Operation, Mr. Dalmas Okendo noted that the portal is a vital tool to enrich counties and enhance investment opportunities. The portal will help keep track record of fast moving counties. “The Integrated Devolution Data Portal that we are launching today will encourage counties to explore their natural advantages to attract investment. Our 10-point policy agenda, which is a guide map for political leaders to centralize industrialization

in their economic agenda, points out the creation of an enabling business environment as the number one priority that will guarantee job creation and economic growth. The portal will play a key role in doing this for county governments,” added Mr. Okendo. The portal will serve as a central national repository for information on county legislation and devolution related issues in all the 47 counties thereby playing a vital role in public awareness by serving as a source of information on key revenue laws, county revenue enhancement measures and county taxation legislation. Moreover it will support peer learning and benchmarking. The Commission on Revenue Allocation is mandated under Article 216 of the Constitution to make recommendations on the sharing of revenue between national and county governments and among county governments. The Commission further makes recommendations on the financing of, and financial management by county governments. In order to make appropriate recommendations, the Commission utilizes data that is accurate, credible, reliable and verifiable. www.kam.co.ke

The portal attests the government commitment to freedom to information. Citizens have the right to information owned by the state. This information will include County legislation, public participation forums, revenue laws, equitable share expenditures essential in decision making particularly for investment and business,”

Kenya Association of Manufacturers

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BRIEFS

Kenya Railways releases new schedule for Madaraka express for Nairobi commuters

Kenya offers consultancy services to Rwanda

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enya Railways Corporation (KR) has revised Nairobi commuter train schedule to ensure that passengers using the commuter link to the SGR Nairobi Terminus have ample time to prepare to board the Madaraka Express train before departure time. According to Kenya Railways Managing Director Atanas Maina, the new schedule is also expected to increase the efficiency of public transportation and contribute further to the growth of the sector and economy at large. The schedule, released by Kenya Railways Corporation, will see the commuter train depart from Nairobi Railway Station at 7:30 am, which will be 30 minutes earlier than it has been previously departing.

The train will then pass by the Makadara station at 7:44am before making another stop at Imara Daima Station at 7:58am. It will then proceed to its final stop, and arrive at the Nairobi Terminus at 8.20am. “The city bound commuter train will depart from Syokimau at 6.30am and pass through the Imara Daima station at 6.44am. It will then make another stop at the Makadara Station at 6.58am, before it finally arrives at 7.10am at the Nairobi Railway Station,” reads the official statement. The move by KRC is an effort put to match the high demand for the Madaraka Express. In the first month of operations, KRC reported that the train carried a record breaking 75,000 passengers. It is also estimated to be carrying at least 1,500 people every day.

The city bound commuter train will depart from Syokimau at 6.30am and pass through the Imara Daima station at 6.44am. It will then make another stop at the Makadara Station at 6.58am, before it finally arrives at 7.10am at the Nairobi Railway Station.

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Geothermal development in Kenya

Kenya is offering geothermal energy exploration consultancy services to Rwanda after its drilling of two wells failed in 2015. The consultancy services to be offered by scientists and engineers from the Kenyan government-owned company, Geothermal Development Company (GDC) that earned Ksh11.9 million (about $114,000) from consultancy to regional economies in 2015/16 financial year. “We are offering scientific and technical support based on our success in geothermal development,” said Paul Ngugi, a manager at GDC. The GDC, which sells geothermal steam to power producers like KenGen for conversion to electricity, has seven operational rigs. Geothermal is seen as an attractive lowcost renewable energy source with low emissions and serves as a stable, reliable base-load electricity. Mr Ngugi said Ethiopia, Tanzania and Djibouti, which share geothermal belt of the Great Rift Valley with Kenya have in recent years sought GDC’s expertise and equipment. According to Renewables Global Status report 2017, Kenya is currently ranked the ninth largest producer for geothermal electricity in the world and Africa’s leader with a capacity of 630 megawatts. Ethiopia is the only other African nation that has developed geothermal energy (7 megawatts). Addis has, however, recently suffered delays in breaking ground for what would be Africa’s largest geothermal plant — 1,000 megawatts Corbetti project. A geothermal centre of excellence is to be set up in Nakuru to expand the regional pool of specialists, including geologists, geophysicists, geochemists as well as reservoir and drilling engineers. The multibillion-shilling hub will sit on 100 acres next to Kabarak University in Nakuru and will feature a training centre, labs and offices. It’s a joint project among the African Rift Valley countries — Kenya, Burundi, Comoros, Djibouti, Democratic Republic of Congo, Eritrea, Ethiopia, Kenya, Malawi, Mozambique, Rwanda, Uganda, Tanzania and Zambia.


BRIEFS

Kenya Airways Group booking portal launched

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group buying option portal has being introduced by Kenya Airways airline to enable its customers to manage their booking process. The new launched portal will enable its customers to book group travel as it seeks to broaden revenue streams. It will also reduce the turnaround time to close the deal. The tool will enable clients to manage their booking process including a view of competitive pricing and reserving seats based on the proposed dates of travel and flights. Kenya Airways Group Managing Director and CEO Sebastian Mikosz says the new tool will improve sales effectiveness as well as increase customer satisfaction by providing tailored offers while also maximizing the revenue contribution from group business. “With its quick turnaround time, our new group booking tool is able to accomplish group travel reservations in minutes rather than days,” Mikosz says.

Most schools and learning institutions are targeted, not forgetting the religious associations, sports teams, associations, corporates, conference delegates and family groups among other customers to use the tool. The Group Booking Tool is currently accessible on the airline’s website for self-registration and booking. Payments and ticketing will be done through the tool to bring efficiency in the groups’ bookings process. The tool will be based on an encoded system based artificial intelligence concepts that compute the users’ group booking requests based on space availability, projected bookings and historical booking of a similar time or season on the previous year(s). The new solution is provided by Sabre Corporation, which is a leading technology provider to the global travel industry. Sabre Corporation is a travel technology company and the largest Global Distribution Systems provider for air bookings. PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13

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BRIEFS

Electric and Hybrid cars in Kenya

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enya is to come up with standards for environmentfriendly electric and hybrid vehicles this year. This will put the country in the global rising revolution in car manufacturing. Transport ministry’s head Martin Eshiwani said that plans are underway for Kenya Bureau of Standards (KEBS) to start the process of developing the rules. “The government is encouraging importation of electric vehicles but we don’t have standards,” he told reporters in Nairobi on Monday. “We have now embarked on the process of developing the standards for electric motor vehicles and motor cycles to reduce emissions.” Currently the transport sector is full of carbon emissions in the environment leading to respiratory diseases, making the citizens to spend much in medical treatment and the government spends most of their finances in medical infrastructure. It has been reported some imported electric and hybrid cars face clearance challenges at the port of Mombasa. In little more than five years, it will be cheaper to buy and run an electric car than a gas-powered car. This, more than anything else, might be the tipping point that gets people off the gas teat. “We want to roll out the process, but we have not started yet. But the initial communications and discussions between our ministry and Kebs have already started,” he said. Charles Ongwae the managing director for KEBS said the standards from inception to approval will take about 18 months. “However, if there is an urgent requirement the law allows Kebs to develop a guideline using a National Workshop Agreement (NWA). NWA takes three months to complete and is translated into a standard in 18 months,” Ongwae said. “Once NWA is approved by the Standards Council, the product is permitted to be sold.” People will also be trained on the maintenance and upkeep of the electric and hybrid cars. Spare parts will also be made available. Growing concerns about climate change is pushing the world to em-

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brace technologies such as electric and hybrid motor vehicles. Thus, leading auto firms in the world are increasingly shifting their investments. Swedish automaker Volvo has announced it will only manufacture hybrid and electric cars from 2019, joining a host of other auto giants. Renault-Nissan have already produced about 350,000 electric cars, while German auto dealer Volkswagen targets a million vehicles by 2025. These shifting investments, however, may not be enough to meet th e hunger of nations such as China that have set high quotas for electric and hybrid cars. Automakers recently wrote to Beijing asking it to relax some of these quotas.

Electric cars importance Another thing which may make electric cars cheaper is size, or a lack of it. A smaller car needs less power to move it around. Today’s huge cars are possible partly because gasoline is such an efficient way to store energy. You can move a lot of steel, glass, and plastic cup holders on a relatively small tank of gas. When we move to batteries, we might realize just how wasteful it

PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13

is to haul around all that extra weight, and buy smaller cars instead. One reason people buy big cars is safety. When a big car hits a small one, the small one will come off worse. But if all cars were smaller, then that wouldn’t be a concern. The switch to electric and the rise driverless vehicles, presents a big opportunity for cities to rethink their infrastructure. Taking away parking spaces, or banning SUVs might be political suicide, but it’s a lot easier to control new things. For instance, subsidized charging could be banned in on-street parking spots or limited only to cars under a certain size. And as city centers are pedestrianized, delivery vehicles could be limited only to early-morning or overnight access (something already in effect in some cities), which means that small cars never have to meet big trucks. All this assumes that we keep using cars, when it might be better for everyone just to get rid of the things, in cities at least, and give all that space back to the people. That’s a long shot, though, so in the meantime we’ll settle for zero emissions, and silent electric motors over noisy machines that pump toxins into our air as they rumble by.


BRIEFS

India’s GST Tax overhaul ‘reshaping logistics sector

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he shift to a unified national tax (GST) has set off a wave of change in India’s notoriously inefficient logistics sector as companies alter the way they store, move and account for goods, according to the Agility Mid-Year Emerging Markets Review. India’s Goods and Services Tax (GST), introduced July 1, rolled more than a dozen state and federal levies into a single tax. The GST is already prompting logistics providers and their customers to consolidate warehousing, revamp road freight strategies, and invest in system upgrades to improve the efficiency of their supply chains, said the report by Agility, a leading global logistics provider. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

The GST could cut logistics costs in India’s formal, organized logistics sector by 20 per cent and provide a dramatic boost to the country’s surging economy, according to the report, which also examines the impact of the UK’s Brexit on emerging markets. Essa Al-Saleh, CEO of Agility Global Integrated Logistics, said: “The GST eliminates borders and checkpoints between India’s 29 states, paving the way for big efficiency gains.” “Companies can carry less inventory, move to hub-and-spoke warehousing, take advantage of long-haul trucking, and look to third-party logistics providers to improve operations and save,” he said. The Agility report was prepared by Transport Intelligence, a leading analysis and research firm for the logistics industry. The report indicates that India’s overnight decision in late 2016 to introduce new bank notes sapped economic growth and curtailed activity in the country’s massive, cash-based informal sector of small merchants, truckers and others. But it concludes that the impact of “demonetisation”

will be short-lived. In its look at Brexit, the report highlights hurdles faced by the UK in its effort to “cut and paste” existing European Union trade rules into an exit agreement with the EU. The more difficult the terms of a UK-EU divorce, the more likely the UK is to seek ambitious new trade deals with emerging markets countries, particularly Commonwealth countries in Southeast Asia and Africa, the report finds. Brexit leaves key emerging markets exporters – South Africa, Kenya, Turkey and others – exposed because the value of the pound has declined and the UK economy is expected to be smaller as a result of the UK’s departure from the EU. The report also suggests that emerging markets countries using the UK as a gateway to Ireland and other EU countries will need to find new routes to those markets. UK exports to the EU could face burdensome checks and customs procedures unless the UK hews to EU product standards and British transporters conform to EU transport rules, it stated.

Companies can carry less inventory, move to hub-and-spoke warehousing, take advantage of long-haul trucking, and look to third-party logistics providers to improve operations and save,”

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WAREHOUSING

Warehousing titbits A warehouse is a place used for the storage or accumulation of goods. The function of storage can be carried out successful with the help of warehouses used for storing the goods.

Functions of Warehousing

Storage: This is the basic function of warehousing. Surplus commodities which are not needed immediately can be stored in warehouses. They can be supplied as and when needed by the customers. Price Stabilization Warehouses play an important role in the process of price stabilization. It is achieved by the creation of time utility by warehousing. Fall in the prices of goods when their supply is in abundance and rise in their prices during the slack season are avoided. Risk bearing When the goods are stored in warehouses they are exposed to many risks in the form of theft, deterioration, exploration, fire etc. Warehouses are constructed in such a way as to minimize these risks. Contract of bailment operates when the goods are stored in wave-houses. The person keeping the goods in warehouses acts as boiler and warehouse keeper acts as boiler. A warehouse keeper has to take the reasonable care of the goods and safeguard them against various risks. For any loss or damage sustained by goods, warehouse keeper shall be liable to the owner of the goods. Financing Loans can be raised from the warehouse keeper against the goods stored by the owner. Goods act as security for the warehouse keeper. Similarly, banks and other financial institutions also advance loans against warehouse receipts. In this manner, warehousing acts as a source of finance for the businessmen for meeting business operations. Grading and Packing Warehouses nowadays provide the facilities of packing, processing and grading of goods. Goods can be packed in convenient sizes as per the instructions of the owner.

Importance of warehousing 1. Hold Wide Assortment As noted in the Distribution Decisions tutorial, many resellers allow their customers to purchase small quantities of many different products. Yet to obtain the best prices from suppliers, resellers must purchase in large quantities. The need, thus, exists for storage facilities that not only hold a large volume of product, but also can hold a wide-variety of resellers’ inventory. Additionally, these facilities must be organized in a way that permits resellers to easily fill orders for their customers. 2. Meet Unanticipated Demand Holding products in storage offers a safeguard in cases of unexpected increases in demand for products. 3. Needed for Large Shipping Quantities As we noted in our discussion of transportation, manufacturers generally prefer to ship in large product quantities in order to more effectively spread transportation costs. This often means manufacturers must create storage areas in which the manufactured goods can build up in the quantities needed for such shipments to occur. 4. Offer Faster Response Additional storage facilities, strategically located in different geographical areas, allows a marketing organization to respond quickly to customers’ needs. The ability to respond with quick delivery can be a major valueadded feature since it reduces the buyer’s need to maintain large inventory at their own locations. 5. Security and Backup For digital products, additional storage facilities are not only needed to offer customers faster access to products (e.g., online content and software) but are also needed to protect against technical glitches and security threats. Regular production Raw materials need to be stored to enable mass production to be carried on continuously. Sometimes, goods are stored in anticipation of a rise in prices. Warehouses enable manufacturers to produce goods in anticipation of demand in future. Time utility A warehouse creates time utility by bringing the time gap between the production and consumption of goods. It helps in making available the goods whenever required or

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WAREHOUSING demanded by the customers. Some goods are produced throughout the year but demanded only during particular seasons, e.g., wool, raincoat, umbrella, heater, etc. on the other hand, some products are demanded throughout the year but they are produced in certain region, e.g., wheat, rice, potatoes, etc. Goods like rice, tobacco, liquor and jaggery become more valuable with the passage of time. Store of surplus goods Basically, a warehouse acts as a store of surplus goods which are not needed immediately. Goods are often produced in anticipation of demand and need to be preserved properly until they are demanded by the customers. Goods which are not required immediately can be stored

Warehouse

of goods by making an endorsement on the warehouse receipt. In some countries, warehouse authorities advance money against the goods deposited in the warehouse. By keeping the imported goods in a bonded warehouse, a businessman can pay customs duty in installments.

Type of Warehouses There are three types of warehouses as described below: • Private Warehouses The private warehouses are owned and operated by big manufacturers and merchants to fulfill their own storage needs. The goods manufactured or purchased by the owner of the warehouses have a limited value or utility as businessmen in general cannot make use of them because of the heavy investment required in the construction of a warehouse,

some big business firms which need large storage capacity on a regular basis and who can afford money, construct and maintain their private warehouses. A big manufacturer or wholesaler may have a network of his own warehouses in different parts of the country. • Public Warehouses A public warehouse is a specialized business establishment that provides storage facilities to the general public for a certain charge. It may be owned and operated by an individual or a cooperative society. It has to work under a license from the government in accordance with the prescribed rules and regulations. Public warehouses are very important in the marketing of agricultural products and therefore the government is encouraging the establishment of public warehouses

in a warehouse to meet the demand in future. Price stabilization Warehouses reduce violent fluctuations in prices by storing goods when their supply exceeds demand and by releasing them when the demand is more than immediate productions. Warehouses ensure a regular supply of goods in the market. This matching of supply with demand helps to stabilize prices. Minimization of risk Warehouses provide for the safe custody of goods. Perishable products can be preserved in cold storage. By keeping their goods in warehouses, businessmen can minimize the loss from damage, fire, theft etc. The goods kept in the warehouse are generally insured. In case of loss or damage to the goods, the owner of goods can get full compensation from the insurance company. Packing and grading Certain products have to be conditioned or processed to make them fit for human use, e.g., coffee, tobacco, etc. A modern warehouse provides facilities for processing, packing, blending, grading etc., of the goods for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse. Financing Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse. The owner can borrow money against the security PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13

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WAREHOUSING in the cooperative sector. A public warehouse is also known as duty-paid warehouse. Public warehouses are very useful to the business community. Most of the business enterprises cannot afford to maintain their own warehouses due to huge capital Investment. In many cases the storage facilities required by a business enterprise do not warrant the maintenance of a private warehouse. Such enterprises can meet their storage needs easily and economically by making use of the public warehouses, without heavy investment. Public warehouses provide storage facilities to small manufacturers and traders at low cost. These warehouses are well constructed and guarded round the clock to ensure safe custody of goods. Public warehouses are generally located near the junctions of railways, highways and waterways. They provide, therefore, excellent facilities for the easy receipt, despatch, loading and unloading of goods. They also use mechanical devices for the handling of heavy and bulky goods. A public warehouse enables a businessman to serve his customers quickly and economically by carrying regional stocks near the important trading centres or markets of two countries. Public warehouses provide facilities for the inspection of goods by prospective buyers. They also permit packaging, grading and grading of goods. The public warehouses receipts are good collateral securities for borrowings.

• Bonded Warehouses Bonded warehouses are licensed by the government to accept imported goods for storage until the payment of custom duty. They are located near the ports. These warehouses are either operated by the government or work under the control of custom authorities. The warehouse is required to give an undertaking or ‘Bond’ that it will not allow the goods to be removed without the consent of the custom authorities. The goods are held in bond and cannot be withdrawn without paying the custom duty. The goods stored in bonded warehouses cannot be interfered by the owner without

the permission of customs authorities. Hence the name bonded warehouse. Bonded warehouses are very helpful to importers and exporters. If an importer is unable or unwilling to pay customs duty immediately after the arrival of goods he can store the goods in a bonded warehouse. He can withdraw the goods in installments by paying the customs duty proportionately. In case he wishes to export the goods, he need not pay customs duty. Moreover, a bonded warehouse provides all services which are provided by public warehouses. Goods lying in a bonded warehouse can be packaged, graded and branded for the purpose of sale.

Shipping Demurrage and Detention fees Explained

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emurrage is a fee leveraged on cargo that stays at a terminal too long. Port officials (as well as railroad and airport authorities) all have the ability to enforce demurrage charges. But this definition is deceptively straightforward. In practice, it can be difficult to understand when you should actually expect to see demurrage charges show up on your bill. But how long is too long? In other words, how much time do you have to move your cargo before demurrage kicks in? Generally, a port will offer 4-7 free days of storage, but

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this figure is by no means set in stone. Each terminal has slightly different rules, and they could change at any time. It’s also worth noting that you’re at risk of incurring fees on both imports and exports. For example, let’s say your cargo has arrived at its destination on time, but mistakes in your paperwork cause delays in the unloading process. Those full containers may end up stuck in processing for several days, which means, demurrage. On the other hand, maybe you’ve coordinated with a truck driver to deliver goods to a terminal for export. But

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then what do you find? The vessel that is supposed to pick up the cargo is running behind schedule. Four, five, six days go by, and before you know it demurrage is in full effect. Each terminal and carrier sets their own rates, and they almost always charge on a per day, per container basis. The key takeaway here is that these fees can add up – and FAST. Whether the port charges $75 or $200 per container, just a few days of late charges for 10 containers could cost you upwards of $6,000. If for some reason your cargo gets held up at the terminal for more than a week, chanc-


WAREHOUSING es are the daily fees will increase. The longer your cargo sits in a port, the more you’ll end up paying per day. What if the delay isn’t my fault? Demurrage is without a doubt one of the most frustrating aspects of working in trade and transportation. At times, you may even feel like terminals are intentionally looking for ways to inflate your bill, but that’s not the case. The intent behind the fee is understandable – facilities need to turnover storage space as quickly as possible in order to make room for new customers. Demurrage vs. detention Detention may refer to multiple situations, and shippers often confuse detention with demurrage. Despite the similarities, they are still very different fees. The best way to distinguish the two is to think of demurrage as fees assessed on containers inside a port, and detention as fees assessed on containers outside a port. In practice, this means that even after you’ve moved your cargo out of the terminal, you need to be prompt in returning the empty containers. If not, carriers may charge you a fixed rate per container per day until they are returned. While detention costs ($50-$100 per day on average) are typically less than demurrage fees, they’ll still put a dent in your bottom line over time. The more commonly used definition of detention is specific to issues with your inland carrier. Charges are calculated based on driver wait time and can pop up regardless of whether you’re taking goods to the port for shipment or from the port to a warehouse. When it comes to imports, drivers have to wait for cargo to be unloaded at a warehouse before they can return the empty containers to the port. Most carriers offer a few hours for free, but any additional time is subject to a detention fee. The same goes for exports – drivers will wait for a few hours to bring the cargo to the vessel for onboarding, but if the clock keeps ticking, detention kicks in. With the numerous congestion issues at ports recently, there has been a substantial increase in the occurrence of both detention and demurrage. Remember, even though shippers aren’t always responsible for the delays that lead to fees, they are often responsible for footing the bill.

How to minimize risk and avoid unwanted fees Think Ahead First of all, dispatch your cargo as far in advance as you can. There’s no use gambling with your delivery schedule – between inclement weather and backlogs at the port, there’s simply no way for you to guarantee that everything goes according to plan. A little time buffer can go a long way in keeping extraneous fees at bay. The same attitude applies when considering loading/unloading times. Never underestimate the delays that could derail the process and have your drivers eyeing the clock. Have a Plan B On that note, a contingency plan is always a solid investment. This could mean finding an alternate trucker in case port congestion is particularly bad or even assessing the rate options and traffic patterns at neighboring terminals in case you need to reroute cargo altogether. Be Informed Just as importantly, you’ll want to read your contract with carriers carefully and make sure you are up to speed on the port regulations and customs process wherever your goods are headed. Although all of the aforementioned information is fairly standard, demurrage and detention fees are officially determined by the terms of your individual contract. Not to mention, different countries could apply definitions differently and leave

more or less room for negotiation, so be sure to read the fine print! In other words, being informed is your best defense. Negotiate Wisely And since we’re on the subject of negotiation, you can always try to request more free time for your cargo. This can work on both demurrage and detention. For example, if you know that your containers are going to take more than 2 hours to unload, you might try talking to the driver well in advance. They’re more likely to be flexible if you prepare them ahead of time rather than try to rush through the unloading process and then beg for forgiveness when you run behind schedule. For demurrage, negotiating extra time can be a little bit trickier. Typically, port officials only grant time extensions to large shippers who are dealing with a substantial volume of cargo. If you ship fewer than 8001,000 containers a year, you might want to consider another cost-cutting strategy. Be as Prepared as Possible Preparation is key, and working with a trusted freight forwarder can do wonders for your stress level. Putting in the work to pre-clear your cargo, issue instructions to delivery drivers in advance, prepare the receiving facility to handle incoming containers, and communicate effectively with customs and terminal officials may seem time consuming, but it will more likely be time saving.

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ECONOMIC OUTLOOK

Africa is the least preferred nearshoring destination as production is being relocated to industrialized countries - Miebach’s Report

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earshoring is one of the forms of outsourcing, where an organization outsourcers its business processes to an outsourcing partner who provides cheaper services. The main differentiator between offshore outsourcing and nearshore outsourcing is that the outsourcing partner in nearshore outsourcing is located geographically closer than the outsourcing partner in offshore outsourcing. The term “Nearshore” has been taken from the fishing industry and now it is used widely in the world of outsourcing.

MIEBACH’S REPORT Frankfurt, July 11, 2017. In today’s globalized world of business, the ever increasing requirements of customers regarding products and services has led to a new trend – nearshoring, which allows the companies to respond to customer needs with shorter delivery times and greater flexibility. Miebach Consulting has conducted an international study on this topic to determine how supply chains are affected by current and future shoring strategies, to evaluate the factors for shoring decisions and to show what shoring trends companies expect in the future. One of the main conclusions of that study is that an increasing amount of companies (51 % of the participants) are producing in closer proximity to their markets instead of moving the production abroad. The study also shows that this percentage is going to increase even more, since 26 % of the participating companies believe that nearshoring is a trend that is going to have a very high or high relevance in a near future, above the offshoring and the onshoring or local production (22 % and 17 %, respectively). Asked more in detail about which localization strategy they would choose and where they would like to implement it in the future, respondents pointed out that in Europe the preferred strategy will be nearshoring (69%), in America Onshoring will

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strengthen (43%), while offshoring is still a major trend in Asian countries (67%). “Modern production processes ensure a stronger focus on customers and can be a competitive advantage given the right location strategy. This is where Near- and Onshoring become more important for companies. Especially the population within the major economic regions can benefit from job creation due to production in proximity to markets.” Bernd Müller-Dauppert, Member of the Management Board, Miebach Consulting GmbH.

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The study participants expect an increasing supply chain complexity due to Near- and Onshoring trends. The process of choosing an optimal shoring strategy and subsequently selecting the ideal location therefore requires an integrated consideration of both supply chain and production networks. In all, 127 companies from various sectors took part in the study. Around 1/3 of participants are from North and South America and 2/3 are from Europe. The complete study brochure can be obtained for free from Miebach Consulting, Ralf Hoffmann (hoffmann@miebach.com).


COVER STORY

Kenyan manufacturers develop policy priorities for transforming the sector The significance of industrialisation to world economics owe a great deal to the role of the manufacturing sector. In Kenya, Manufacturers are championing inclusive and broad-based economic growth that can only be achieved through Industrialisation. Our Writer Malachi Motano engages Flora Mutahi, Chairperson Kenya Association of Manufacturers (KAM) in a question (Q) and answer (A) interview as players maintain that Kenya has everything it needs to transform into an industrial hub as indicated in the 10-point plan. Q Thank you so much even as KAM struggles to nationalise the vision and narrative of industrialisation, making it central to every facet of the political and social structure of our country. Just before we look at the ten point plan, describe Kenya’s manufacturing sector A I appreciate this opportunity. The manufacturing sector in Kenya has being growing at a slower pace than expected. While manufacturing has traditionally been relatively sophisticated given Kenya’s level of income, it is becoming less so and is failing to keep pace with developments in the sector in other East African countries. The share of manufacturing in gross domestic product (GDP) was the same in 2015, as it was in 1965, and it has actually declined over the last five years to a low of 9.2% in 2016. At the current annual GDP growth rate of 5.7%, Kenya should double its manufacturing output to reach the government’s target of 15% of GDP in five years. The sector has a critical role to play in sustaining growth and generating

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Flora Mutahi, Chairperson Kenya Association of Manufacturers (KAM)

employment as Kenya moves towards realising the aspirations of its Vision 2030.

Q Back to the subject. What informed the 10-point manufacturing agenda A Well, the logic of the 10-point manufacturing agenda is the kind of intervention needed to call attention to the potential that lies in this sector. The agenda aimed to centralise the economic agenda of this country in their manifestos, to transform manufacturing sector which is critical for the country's economic transformation by providing the much needed jobs. We seek to support the economic transformation by identifying policies that can help grow the sector and attract investment. Q Highlight the ten policy priority areas. A: The agenda focuses on sectoral priorities such as: creating a massive export push, raising productivity to world class standards, promoting and leveraging ‘Buy Kenya Build Kenya’,

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tackling non-customed goods and counterfeits, and developing a stable policy environment. Additionally, it makes proposals on job creation through the revamping of technical vocational education and training (TVET) curriculum in the country and offering apprenticeship.

Q: Thanks for the summary lets then discuss them in details for example creating a business environment that is conducive to manufacturing investment –how A: The government needs to create a conducive business environment through enactment of predictable laws and regulations that attract and retain investment to all firms including SMEs. We also need to build a robust anti-counterfeit policy and enforcement strategy. We are currently working together with the Anti-Counterfeit Agency and the Judiciary in the fight against counterfeits. However, a lot still needs to be done. We need to address the county level business environment issues through the


COVER STORY Ministry of Devolution and Planning, county governments and subnational regional blocs. Q Another area is enforcing a fiscal regime that supports manufacturing. Kindly elaborate A Basically, what manufacturers need to thrive is access to long term financing at a lower cost. This will ensure sufficient revenue generation, efficient procurement and payment subsystems. At the moment, the exact impact of the fiscal regime on manufacturers is unknown. Further, the fiscal regime is not being employed as a tool to catalyze manufacturing. The Association proposes an analysis of the current fiscal regime in order to identify key fiscal constraints for the manufacturing sector and to understand how it can better incentivize investment in the industry. Q Would you give some examples A Yes, some examples include increasing the tax collection base in order to ease tax pressure on the formal manufacturing sector at the same time, incentives should be developed to bring on board the informal sector into the tax bracket, developing and implementing a taxation regime that encourages local competitive production, reviewing the need for time-bound, fiscal incentives in the key sectors of the Kenya Industrial Transformation Programme (KITP) and Vision 2030 including (agro-processing, fisheries, leather, textiles and apparel, and steel and iron manufacturing), a streamlined and harmonized taxation regime system between the national and county governments and developing a fiscal strategy that supports industry through allocations from national and county governments budgets.

Q Issues of land-Manufacturers talk of making land ownership more affordable and accessible my question is, how can the government support this initiative A The government needs to address the role of land speculation in pushing up land prices and analysis whether the Land Value Index Bill will help address inflation caused by such speculations. The government also needs to facilitate the prompt issuance of land titles, including SMEs Q How can export push for local manufacturers be enhanced A Exporting is key for job creation and the growth of any country’s economy. Kenya’s exports are under threat. The KNBS, 2017 indicates that the Kenya’s total exports to the EAC registered a 4% decline in 2016 to Ksh. 121.7billion, with exports to Uganda and Rwanda falling by 9.3% and 2.5% respectively. This is a worrying trend. In order to push our exports, Kenya needs to undertake coordinated action to promote exports and to secure market access for our locally produced goods and services. Q: The question remains how? A This can be achieved by focusing on export diversification for the KITP sectors to EAC agreements with member states on the removal of non-tariff barriers for Kenyan goods in the EAC, negotiating better market access for KITP prioritized sectors through securing stable conditions with the EU, the UK and the US as well as developing trading agreements and export promotion strategies to emerging markets. Kenya also need to put up more effort in facilitating trade by streamlining customs and building trade related infrastructure along trade and economic corridors such as LAPSSET

Corridor Program and the North Corridor, removal of Import Declaration Form (IDF) and Railway Development Levy and making foreign exchange cheaper for manufacturers to incentivize exports. Q KAM has also highlighted developing worker skills and support innovations for increased labour productivity. Discuss how A Labour productivity is essential for manufacturing competitiveness. The public and the private sectors can develop worker skills and support innovation. Today, manufacturers need workers who either have technical skills set or possess trade-based skills. Kenya’s education system is failing to meet the market needs, as it doesn’t prepare labour entrants with appropriate skill despite the quantity of graduates rising rapidly. In order to bridge this gap, we need incentive programmes for skill development led by private sector rather than supply driven, public sector led training. KAM launched its Technical and Vocational Education and Training (TVET) earlier in the year aimed at bridging the skills gap where industries provide internships to technical skills graduates. Q Explain ‘create a fit-for purpose public service’ A A crucial element of implementing public policies for manufacturing is a public service that is fit for purpose. This concerns the ability both to coordinate action across different government departments and to have right competitiveness and an absence of corruption. Q In your opinion what actions do you think should be taken to improve leadership, coordination and excellence among ministries, countries and public agencies A Well, establish a strong industrial policy implementation unit that can coordinate interministerial activity, led by the presidency, working closely with the Ministry of Industry and other industries such as transport, energy, also ensure that this unit can experiment, monitor implementation and receive feedback and adjust policies when needed. As well as addressing corruption decisively and comprehensively.

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COVER STORY Q How does a coordinated value chain approach help the manufacturing sector A The promotion of the manufacturing sector requires a coordinated approach. If the manufacturing sector is to thrive, it is important that sector receives dedicated attention including from the manufacturing businesses. Clustering and value chains are to ways in which firms benefit from working together. For instance, registration of SMEs and informal sector is key in voicing concerns and ideas of the sectors. Q We have noted there are Kenyan manufactures keen on moving to Ethiopia; what are Kenya’s biggest opportunities and challenges the manufacturing sector is facing A We have also seen the closure and relocation of big manufacturing plants such as Eveready East Africa, Sameer Africa and Cadburys Kenya among others to neighbouring countries. Most of the companies that have shut down have cited similar problems that KAM has consistently highlighted through its advocacy including the influx of cheap imports from China and India and counterfeits that render local products uncompetitive. Local companies have to deal with increased taxation, multiple levies and charges and other Non-tariff barriers, basically an inconsistent regulatory environment that in the end impacts their pricing. Manufacturing has the potential to play a particularly important role by putting Kenya on a sustainable growth path through its direct contribution to creating quality employment, strong linkages with other sectors, ability to raise capital accumulation and smooth volatility in the economy. We have definitely seen a move by the government to remedy this through such initiatives as the KITP but we need to move fast to curb the shut-downs that are crippling the entire manufacturing sector.

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Q With the turbulence in the retail sector, how is KAM handling this- bearing in mind that manufacturers need retail chains to effectively distribute their product. A Late payments have been a huge problem for manufacturers. As KAM, our fears are based on the structural weaknesses existing in the Kenyan wholesale and retail sector which affect our efficiencies to make payments. The State Department of Trade developed a National Trade Policy which sort to support the growth of the wholesale and retail sector. The policy was developed to address late payments, building synergies that facilitate ease of trade and developing a shared vision for all stakeholders. One of the key issues affecting

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Kenya Emerging as One of East Africa’s Growth Centers

the wholesale and retail sector was Prompt payment which resulted to the formation of a national working group to address this issue. KAM was part of the working group. Q Lastly you have highlighted building trust and reciprocity for effective coordination and partnership. Share more as your parting short A In order for manufacturing to play a leading role in economic growth, the public and private sector needs to create trust and reciprocity that facilitates effective coordination and partnerships needed to implement policies. Lack of coordination between the two makes it difficult to build common understanding that would otherwise push the manufacturing agenda.


TECHNOLOGY

Seacom’s advice for Ransomware prevention

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nternet infrastructure SEACOM is advising Kenyan firms to store data in cloud services as a back-up plan in case of data loss or cyber attacks. Recently, two ransomware attacks did spread all over the world which led businesses and government agencies to a standstill. Example of a ransomware include WannaCry which stormed through the web on May 12th 2017, it was the biggest cyber attack ever in the history of the world. SEACOM runs an undersea fibre optic cable, launched as Africa’s first broadband submarine cable system along the eastern and southern coastlines in 2009, bringing with it a vast supply of high quality and affordable Internet bandwidth. It’s a privately owned and operated, allowing the company the agility to rapidly deploy new services, commercial structures and infrastructure in response to customer requirements. “Kenyan companies should store their critical data in cloud services to guard against increasing cyber attacks,” Internet infrastructure firm SEACOM has said. “We believe that by embracing enhanced technologies such as cloud computing Kenyan organisations will have access to an affordable but effective solution to deal with rising cyber threats,” said SEACOM Sales Lead Patrick Ndegwa. Mr Ndegwa added that companies that suffer ransomware but whose data is backed-up off site have quicker recovery periods, downloading copies of information lost in the attack rather than starting from scratch.

Why ransomware often goes undetected by antivirus

Ransomware uses several evasion tactics that keep it hidden and allow it to: • Not get picked up by antivirus products • Not get discovered by cyber security researchers • Not get observed by law enforcement agencies and their own malware research ers.

Why ransomware creators and distributors target businesses: •

Because that’s where the money is; Because attackers know that a successful infection

ing tricks used to confuse and coerce victims into paying the ransom; • It will add a different extesion to your files, to sometime signal a specific type of ransomware strain; • It will display an image or a message that lets you know your data has been encrypted and that you have to pay a specific sum of money to get it back; • It requests payment in Bit can cause major business coins because this disruptions, which will increase crypto-currency cannot be their chances of getting paid; tracked by cyber se • Because computer systems curity researchers or law in companies are often com enforcements agencies; plex and prone to vulner • Usually, the ransom payments abilities that can be exploited have a time-limit, to add an through technical means; other level of psychological • Because the human factor is constraint to this extortion still a huge liability which can scheme. Going over the dead also be exploited, but through line typically means that social engineering tactics; the ransom will increase, but • Because ransomware can it can also mean that the data affect not only computers will be destroyed and but also servers and lost forever. cloud- • It uses a complex set of eva based file-sharing systems, sion techniques to go unde going deep into a business’s tected by traditional antivirus core; (more on this in the “Why • Because cyber criminals know ransomware often that business would rather goes undetected by antivirus” not report an infection for fear section); or legal consequences and • It often recruits the infected brand damage. PCs into botnets, so cyber • Because small businesses criminals can expand their are often unprepared to deal infrastructure and fuel future with advanced cyber attacks; attacks and have a • It can spread to other PCs relaxed BYOD (bring your own connected to a local network, device) policy. creating further damage; Ransomware has some key characteristics • It frequently features data exfiltration capabilities, which that set it apart from other malware: means that it can also extract • It features unbreakable en data from the affected com cryption, which means that puter (usernames, passwords, you can’t decrypt the files on email addresses, etc.) and your own (there are various send it to a server controlled decryption tools released by by cyber criminals; encrypting cyber security researchers – files isn’t always the endgame. more on that later); • It sometimes includes geo • It has the ability to encrypt graphical targeting, all kinds of files, from docu meaning the ransom note is ments to pictures, translated into the victim’s videos, audio files and other language, to increase things you may have on your the chances for the ransom to PC; be paid. • It can scramble your file To conclude, always back-up names, so you can’t know your data for safety reasons, which data was affected. This better safe than sorry. is one of the social engineer PROCUREMENT & LOGISTICS MANAGEMENT August 2017 Issue No.: 13

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DEVELOPMENT

Government commissions Ksh 1billion MbitaRusinga bridge

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resident Uhuru Kenyatta on Wednesday opened a bridge connecting Mbita town to Rusinga Island constructed at a cost of Sh1 billion. According to the President, the construction of the bridge was prove that the Government cares about the interest of the people of Nyanza contrary to claims from the opposition. The Head of state also promised that the Government will construct more roads in Home Bay County including the Rusinga Island ring road and Mfangano road. The bridge replaces a causeway built in 1983 that blocked the flow of water thereby reducing the fish population. The President who was accompanied by his deputy William Ruto in Rusinga and Mbita, said the new bridge will ease transport in the area besides improving the availability of fish. President Kenyatta said the new bridge will also contribute to the reduction of the water hyacinth since it will not block the flow of water. The President, “You should know that we want development in every part of Kenya. The Standard Gauge Railway reaches Nyanza, the government will establish a dry port in the region that will create more jobs for the youth.”

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You should know that we want development in every part of Kenya. The Standard Gauge Railway reaches Nyanza, the government will establish a dry port in the region that will create more jobs for the youth.”

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The President urged residents to support the re-election of the Jubilee Government because it cares about the interests of all Kenyans. “We are seeking votes from all Kenyans on the platform of unity and development,” he said. He said the Government has expanded access to electricity and will continue with the efforts to ensure every Kenyan who needs the service is able to get it easily. The President also reassured residents that the government is resolving any disputes that existed over Migingo Island, saying that there are teams on the ground demarcating the borders in the area. He asked residents to be respectful to their Ugandan neighbors even as the issue is resolved. “Even if you know that Migingo is Kenya, you should respect our neighbors and you do not have to insult anyone,” said the President as he addressed residents of Mbita. Deputy President Ruto said the Government has delivered on its promise to improve infrastructure, to upgrade hospitals, reform education, expand access to electricity and much more.


DEVELOPMENT

Coal plant contract in Lamu extended to 2018

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arara Oil & Gas Ltd contract has been extended by the Kenyan government to next year December 2018. The firm is to build a 1,000MW coal-fired plant in Lamu, Pate Island. “The extensions will enable Zarara to drill to the Pate-2 and Pate-3 wells in their search for natural gas deposits in Lamu County, at the area where the Pate-1 well drilled in 1971 by Shell and BP encountered fossil fuel” said Mark Bristow, the MRI Chairman. Zarara is a subsidiary firm of Midway Resources International (MRI). Zarara owns 75 per cent equity in block L4 and L13. Swiss Oil Holdings International Ltd has 15 per cent stake and the National Oil Corporation of Kenya’s 10 per cent carries the government’s interest. The Lamu residents are in fear that the coal plant will pollute the environment hence their health will be jeopardized with. Natural gas, being a clean source of energy is globally used for power generation and fuelling vehicles. 30 Million dollars is to be spent on the wells and the gas to generate power 70km southwest of the KenyaSomali border. Pate 1 was abandoned in 1971 after Shell and BP failed to find crude oil. Pate 2 to take 120 days to drill, test and complete. Pate 3 well to be sunk from the Pate 2 pad to a depth of 4,500 metres.

Zarara’s strategy is to determine how much natural gas the Pate fields holds. Gas and electricity production will depend on well flow-rates expected to range from 10 to 20 million standard cubic feet per day based on Pate-1 data. “The wellheads and phase 1 of the LIGPP will be located on Pate Island, less than 20 kilometres from the proposed Lamu port and Lamu Port-South Sudan-Ethiopia- Transport corridor terminus,” said Mr Worthington.

A feasibility study for phase 1 in progress will be completed by end of 2017 and targets 50 to 200 megawatts. Subsequent phases are likely to be completed with a leading electrical power generation development and operating partner. The MRI said power generation will expand in phases of up to 1,000MW depending on successful drilling and proved potential deposits in the gas field.

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BRIEFS LOGISTICS

World Bank approves $ 345 million loan to Dar es Salaam Maritime Gateway Project

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he country is vying with the port of Mombasa in Kenya to become the trade hub for landlocked neighbors such as Zambia, Rwanda, Malawi, Burundi, Uganda and the Democratic Republic of the Congo, but both ports are hobbled by congestion and inefficiency. The port handled 13.8 million tonnes in 2016 – an increase from 10.4 million in 2011, reflecting an average growth of 9 percent per year, according to the bank. Tanzania wants to lift its capacity to 28 million tonnes a year by 2020. “The project represents the start of an incremental process towards increasing the capacity of the port of Dar es Salaam and strengthening its economic role in the region,” Richard Martin Humphreys, the World Bank’s lead transport economist, said in a statement. In a 2014 report, the bank said inefficiencies at the port was costing Tanzania and its neighbors up to $2.6 billion a year. The statement said ongoing infrastructure investments at the port were expected to improve overall productivity and reduce waiting time to berth from 80 hours to 30 hours. “Enhancing its operational potential will boost trade … and reduce the current cost of $200-$400 for each additional day of delay for a single consignment,” said Bella Bird, the World Bank’s Country Director for Tanzania. The loan is the second batch to be approved by the bank for the expansion of the port this year. Tanzania received $305 million in January. The DSMGP is to be implemented as part of a larger ongoing investment program for the overall development of the Port of Dar es Salaam. It is supported by several development partners comprising the Tanzanian Government which is contributing about $63 million through the Tanzania Ports Authority (TPA); regional trade lobby TradeMark East Africa (TMEA) which is supporting improvements in the port’s current spatial and operational efficiency through the rehabilitation of access and egress roads and demolition and relocation of sheds; and the United Kingdom through its Department for International Develop-

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ment (DFID) which is contributing a $12 million grant. The funding will further support capacity building programs in institutions like TPA’s vocational training facility Bandari College, the Dar Maritime Institute and the College of Engineering and Technology at the University of Dar es Salaam. Engineer Deusdedit Kakoko, the Director General of the Tanzania Ports Authority said these improvements of the Port of Tanzania are long overdue adding, “We have been performing rather optimally yet under very difficult conditions.” The country early this year signed a $154 million contract with the state-run China Harbour Engineering Company (CHEC) to build a roll-on, roll-off (ro-ro) terminal to deepen and strengthen seven berths at the port. Tanzania hopes expansion of the port will increase container throughput to 28 million tonnes a year by 2020 from around 20 million tonnes currently. “Deepening and strengthening of the berths will allow big container ships to dock in Dar es Salaam. All these efforts are being done in order to increase competitiveness of the port,” works, transport and communications minister Makame Mbarawa said at the signing of the contract.

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East Africa’s second-biggest economy wants to profit from its long coastline and upgrade its rickety railways and roads to serve the growing economies in the land-locked heart of Africa. Big gas finds in Tanzania and oil discoveries in Kenya and Uganda have turned East Africa into an exploration hotspot for oil firms, but transport infrastructure in those countries has suffered from decades of under-investment. The port, whose main rival is the bigger but also congested port of Mombasa in Kenya, acts as a trade gateway for landlocked African states such as Zambia, Rwanda, Malawi, Burundi and Uganda, as well as the eastern region of the Democratic Republic of Congo. The World Bank said in a 2014 report that inefficiencies at Dar es Salaam port were costing Tanzania and its neighbors up to $2.6 billion a year. Chinese President Xi Jinping announced plans to plow $60 billion into African development projects at a summit in Johannesburg in 2015, saying it would boost agriculture, build roads, ports and railways and cancel some debt.


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INDUSTRIALIZATION BRIEFS

Kenya launches National Trade Policy to boost foreign earnings

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he Government of Kenya, through the Ministry of Industry, Trade and Cooperatives, has launched launched the National Trade Policy to boost its export local trade. The launch of the National Trade Policy took place during the first day of h=the just ended Kenya Trade Week – a three-day event that has brought together prominent players and stakeholders in the trade sector under the theme: Transforming Kenya into a Competitive Export-Led and Efficient Economy. “The new Trade Policy articulates provisions that are geared toward promoting efficiency in the growth of domestic trade through transformational measures that address the constraints impeding against the development of the wholesale, retail and informal sectors,” said National Treasury Cabinet Secretary, Henry Rotich, who was speaking on behalf of H.E President Uhuru Kenyatta.

The new Trade Policy adds impetus to the robust trade policy reforms that the country has pursued under regional and multilateral trade arrangements and translates to Kenya’s commitments at regional and multilateral level to solidify policy measures and create opportunity for their domestication through the various instruments that are proposed. This will contribute to strengthening of regional integration and will in turn anchor Kenya as a dependable and predictable trading partner. “The National Trade Policy is being launched at a time when the global trade landscape is facing emerging challenges. Over 70% of global trade is made up of manufactured goods. Intra-Africa trade averages about 12% whilst Kenya’s share of both the global pie as well as in Africa has been facing serious bottlenecks leading to a huge balance of trade deficit with most of our trading partner,” said Principal Secretary, State Department of

Trade – Ministry of Industry, Trade and Cooperatives Cabinet Secretary, Adan Mohammed. Apart from the launch of the National Trade Policy, the Government of Kenya, through the Ministry of Industry, Trade and Cooperatives, also launched and unveiled: • The Buy Kenya Build Kenya Strategy • Guidelines for Kenya’s Trade and Investment Missions • The National Export Devel opment and Promo tion Strategy for Kenya 2017- 2022 • The National E-Trade Portal • The National Trade Facilitation Committee (NTFC) • The State Department for Trade Website Moreover, the Buy Kenya Expo will run through the whole week. “We urge all Kenyans to come and take part in this year’s Trade Week. We have a host of products and exhibitors drawn from varied parts of the country and this offers a great opportunity for us to support our local trade sector,” said Principal Secretary, State Department of Trade – Dr. Chris Kiptoo. The National Trade Policy spells out complementarity with other sectors and provides a framework for these sectors to adopt policies that complement rather than compete with each other. This trade policy in particular introduces a trade agenda in several sectors such as agriculture, industry, infrastructure and ICT.

1st Electric rail in Africa to start operations in October 2017

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thiopia and Djibouti launched their newly built standardgauge modern electric railway, known as, Ethio-Djibouti Railway, in October 2016. Covering a total of 752-kilometer, it is the first electric railway in Africa, referred to as an ‘umbilical cord’ that intertwined the two nations for more than a century. Ethiopia has disclosed that its Chinese-built electric rail line will start

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commercial operations in October this year (2017). Prime Minister Hailemariam Dessalegn of Ethiopia and President Ismail Omer Gulleh of Djibouti officially inaugurated the railway project, accompanied by Togolese President who was paying an official visit in Ethiopia and by an official envoy of the Chinese President whose nation has extended 70 percent of the total cost. “It is indeed a historic moment, a

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pride for our nations and peoples,” said Hailemariam Desalegn, the prime minister of Ethiopia, shortly before the train — the first electric, transnational railway in Africa — headed toward Addis Ababa, the Ethiopian capital. “This line will change the social and economic landscape of our two countries.” Ahmed Shide, Minister of Ethiopia’s Ministry of Transportation, said the rail project is a showcase of China’s


INDUSTRIALIZATION BRIEFS support for Ethiopia’s efforts to transform its economy through infrastructural development. “We hope the rail project will facilitate expansion of industrial manufacturing and boost Ethiopia’s competitiveness by significantly cutting time needed for Ethiopia’s exports to reach Djibouti port,” he added. China, which designed the system, supplied the trains and imported hundreds of engineers for the six years it took to plan and build the 466-mile line. And the $4 billion cost? Chinese banks provided nearly all the financing. China is placing more than $14 billion worth of bets here in Djibouti, a geopolitically strategic speck of a country beset by soaring poverty and unemployment. The projects include three ports, two airports and a pipeline that will bring water from Ethiopia, its landlocked neighbor and a regional economic power that depends on Djibouti’s ports for 90 percent of its foreign trade. The electrified rail line is expected to cut transportation time needed for goods to reach Djibouti port from the Ethiopian hinterland and vice versa from at least two days to 10 hours. The rail line will also provide a passenger service, with an average speed of 120 km per hour and a single coach holding 118 passengers at a time. The first 320 km of the rail project from Sebeta to Mieso was carried out by China Rail Engineering Corporation while the remaining 436 km from Mieso to Djibouti port section was built by China Railway Group. The two nations have outlaid an aggregate of USD 3.4 billion to finalize the railway infrastructure which is laid on 756km from Addis Ababa to the Port of Djibouti.

History of the rail

The old railway that linked the two neighboring countries was built by France some 119 years ago. Though it is superseded today, it has left historic legacies for the two nations. The Eastern Ethiopia city, Dire Dawa, located 300km away from the boarder of Djibouti is one of the prominent living legacies the old railway has left. Created along with the establishment of the old railway line, Dire Dawa has interwoven the Oromos with the Somali nationals of both Ethiopia and Djibouti. This makes Dire Dawa an exception to the current ethnic federalism of Ethiopia. Against the ethnic decentralization, Dire Dawa has been left as a federal city with self-administration autonomy. Dire Dawa was also

a city where many Djiboutian boys and girls including the sitting president Ismail Omer Gulleh were raised. Djibouti had been under the protectorate of France, its former colonizer, up until President Gulleh was first elected in the 1999 as a handpicked successor of his uncle, Hassen Gouled. Gouled had been administering his country with a budget slice thrown from France and a military support to safeguard the country’s sovereignty. However, Djibouti’s relation has deteriorated during the reign of President Guelleh, who is alleged to be involved in the mysterious death of the France Judge Bernard Borrel in Djibouti. This led France to cut its budgetary support leaving the small East African coastal state to struggle with economic crisis. This difficult time coincided with Ethiopia’s departure from the Port of Massawa following the bloody Ethio-Eritrtea war, which ended in 2000. Since then, the Port of Djibouti has been serving as the only sea outlet for landlocked Ethiopia. Consequently, the government of Djibouti has been amassing more than 70 percent of its annual revenue from the port which is providing 87 percent of the traffic for Ethiopian imports and exports, according to reports.

Boost economy

Ethiopia’s growing importation of goods, fertilizers and food aids and its growing export at the same time have created congestions at the Port of Djibouti. The congestion is mainly attributed to logistic problems Ethiopia currently is facing. The rail will transport 500 tons of cargo which is equivalent with carriage capacity of 88 cargo trucks, according to the Ethiopian Railway Corporation (ERC) and it will reduce the duration of cargos from the earlier three days average time to 10 hours. President Guelleh on his part said the economic ties created between Ethiopia and Djibouti through the old rail network will expand beyond port services. “Economic integration is our destiny,” he further added. Ethiopia is seeking to have 5,000 km of new lines working across the country by 2020. The electrified and environmentally friendly project will also replace a diesel-powered Addis Ababa-Djibouti line.

Summary

1. The 752-km railway links the Ethiopian capital Addis Ababa and the port of Djibouti in the Gulf of Aden country

Djibouti. It offers both passenger and freight services. 2. The majority of the railway is located in the Horn of Africa country Ethiopia. The rail line runs from plateau as high as 2,400 meters in the west to flat deserts in the east. The big altitude difference was a major technological challenge in its construction. 3. The railway is the continent’s first electric railway, which powers the trains through overhead wires. Compared with locomotives that burn diesel, the electric trains boast powerful traction and are more environmentally friendly. 4. The railway has a designed speed of 120 km per hour, which may not be impressive to countries that have highspeed rails. But with faster trains come higher costs, both in construction and operation, so experts say the current speed design proves more cost-effective for Ethiopia and Djibouti given their industrial levels and freight volumes. 5. With a total investment of 4 billion U.S. dollars, the line is constructed by China Railway Group and China Civil Engineering Construction Corporation, two state-owned companies of China. It is the first railway built using complete sets of Chinese equipment and standards outside China. 6. The railway is also the second transnational railway built by Chinese firms in Africa, following the Tazara railway, which links Tanzania’s Dar es Salaam with Zambia’s Kapiri Mposhi. During a visit to Ethiopia in May 2013, Chinese Vice Premier Wang Yang hailed the Ethiopia-Djibouti railway as the “Tazara railway in a new era.” Yet, unlike the Tazara railway, which was built in the 1970s as a foreign aid project by the Chinese government, the Ethiopia-Djibouti railway is a commercial act by Chinese firms. 7. Prior to the project, there was no modern railway in Ethiopia or Djibouti. The railway is capable of slashing travel time between Addis Ababa and Djibouti from 7 days on roads to about 10 hours. It also provides landlocked Ethiopia with faster access to the port in Djibouti. There have been expectations for the railway to boost industrialization along its route. 8. The railway will be managed by a consortium of Chinese companies for about six years given the lack of railwayrelated personnel in the two countries. The Chinese management is also commissioned to train local stewards, drivers and technicians, creating thousands of new jobs and nurturing railway expertise for the two African countries.

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BRIEFS REPORT

South Africa, Egypt, Kenya, Morocco and Nigeria remains Africa’s key hub economies

FDI Report

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outh Africa remains the leading foreign direct investment (FDI) destination in Africa, with a 6.9% increase in FDI projects in 2016, according to financial services advisory firm EY’s latest ‘Africa Attractiveness’ report, published on Wednesday. The report provides an analysis of FDI investment into Africa over the past ten years. The 2016 data shows that Africa attracted 676 FDI projects – a 12.3% decline from the previous year. FDI job creation numbers declined by 13.1%.However, capital investment increased by 31.9%. The key ‘hub’ economies, South Africa, Egypt, Kenya, Morocco and Nigeria collectively attracted 58% of the continent’s total FDI projects in 2016. Morocco regained its place as Africa’s second-largest FDI recipient with a 9.5% increase in projects. Egypt was third, attracting 19.7% more FDI projects than the previous year. The continent-wide surge in capital investment was primarily driven by capital intensive projects in two sectors, namely real estate, hospitality and construction, and transport and logistics. The continent’s share of global FDI capital flows increased from 9.4% in 2015 to 11.4%. This made Africa the second-fast-

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est growing FDI destination by capital. However, heightened geopolitical uncertainty and “multispeed” growth across Africa present a mixed FDI picture for the continent. “This somewhat mixed picture is not surprising to us. Investor sentiment towards Africa is likely to remain somewhat softer over the next few years. This has far less to do with Africa’s fundamentals than it does with a world characterised by heightened geopolitical uncertainty and greater risk aversion,” says EY Africa CEO Ajen Sita. While investors with an existing presence in Africa remain positive about the continent’s longer-term investment attractiveness, they are also “cautious and discerning”, he adds. However, there diversification of Africa’s FDI investors is ongoing, with more than one-fifth of FDI projects and more than half of capital investment into Africa coming from the Asia-Pacific in 2016. Most notably, Chinese FDI into Africa increased dramatically. This made the country the single largest contributor of FDI capital and jobs in Africa in 2016. Although foreign investors still favour the key hub economies in Africa, new FDI destinations are emerging,

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with Francophone and East Africa becoming markets of interest, according to the report. West Africa’s second-largest economy, Ghana, remains a key FDI market, despite recording a 31.7% decline in FDI projects in 2016 and weak growth in recent years. The country’s improving macroeconomic environment and strong governance record have seen Ghana rise to fourth position in the EY Africa Attractiveness Index (AAI). The index was introduced in 2016, to measure the relative investment attractiveness of 46 African economies based on a balanced set of shorter and longerterm metrics. Côte d’Ivoire also features among the top ten of the AAI. With a 21.4% increase in FDI projects in 2016, this illustrates that it is becoming a country more favoured by investors. Senegal has also emerged as a potential major FDI destination, although this is not reflected in its current FDI numbers. However, the country ranks eighth on the AAI, owing to its diverse economy, strong strides in macroeconomic resilience and progress in its business environment improvements. “By 2030, Africa remains on track to be a $3-trillion economy. However, growth needs to become more inclusive and sustainable to eradicate poverty at the levels that are required. “If we accept the reality that physical connectivity – enabled by regional integration and the development of physical infrastructure – will remain a key stumbling block to inclusive growth across Africa for at least the next decade, then the need to actively embrace digital connectivity becomes critical,” says Sita. He avers that efforts to harness the potential of digital technologies as a fundamental driver of inclusive growth are “still far too piecemeal and fragmented”, suggesting a more collaborative effort between governments, business and nonprofit organisations to adopt technological disruption, and create digitally enabled offerings with a focus on health, education and entrepreneurship. Source: ENGINEERING NEWS


REPORT

SAP to investigate its South Africa unit over 10% kickback for government contracts

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orld’s third largest software company; SAP, has put four senior managers in South Africa on administrative leave and begun a probe into reports into allegations of bribery and corruption over a USD 76 million contract with state owned rail and logistics company Transnet. It is alleged that SAP paid alleged kickbacks in the form of sales commissions to a firm linked to the politically connected Gupta family, helping SAP clinch a deal worth 1 billion rand ($76 million) with and other stateowned firms. “We’ve obviously seen the claims in the media. And we’re taking these extremely, very, very seriously.” Adaire Fox-Martin, co-president for global customer operations, has said.

Fox-Martin said SAP was putting the executives on administrative leave, pending the outcome of internal and external investigations that the company has initiated. With €22-billion (about R330 billion) in revenue last year, the German company has hired an independent international law firm based in the United States to conduct an external investigation and also will run its own, internal probe using SAP’s compliance organisation, she said. SAP declined to name the four management-level employees, or their job titles. The Guptas, Indian-born South Africans, and Zuma have previously denied wrongdoing. Seeking response to the fresh allegations involving SAP, a Gupta family spokesman and Zuma’s spokesman did not respond to calls and emails for comment.

DAMAGE CONTROL

SAP, the world’s largest supplier of business planning software that multinationals use to manage far-flung operations, is acting quickly to limit reputational damage for a company that is a leading supplier of compliance software and services, among its many products. It also must ward off repercussions from regulators for possible U.S. foreign corrupt practice violations after it was hit last year with a $3.9 million fine by the Securities and Exchange Commission. The company, whose stock is dual-listed in Frankfurt and New York, was found by the SEC to have failed to maintain sufficient internal controls to prevent a bribery scheme by a former sales executive who won lucrative contracts with the Panamanian government. “We feel that a fast reaction to this, indicating that we are working to get to the bottom of this, will actually indicate the seriousness with which SAP takes these allegations and our intention to conduct a fully transparent investigation on this,” Fox-Martin said.

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BRIEFS REPORT

FRANCHISE BUSINESS MODEL TAKING ROOTS IN KENYA

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ranchising is simply a method for expanding a business and distributing goods and services through a licensing relationship. In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand and support.

Business Format Franchising

There are two different types of franchising relationships. Business Format Franchising is the type most identifiable to the average person. In a business format franchise relationship the franchisor provides to the franchisee not just its trade name, products and services, but an entire system for operating the business. The franchisee generally receives site selection and development support, operating manuals, training, brand standards, quality control, a marketing strategy and business advisory support from the franchisor.

Traditional or Product Distribution

While less identified with franchising, traditional or product distribution franchising is actually larger in total sales than business format franchising. In a traditional franchise, the focus is not on the system of doing business, but mainly on the products manufactured or supplied by the franchisor to the franchisee. In most, but not in all situations, the manufactured products generally need pre- and post-sale service as found in the automobile industry. Examples of traditional or product distribution franchising can be found in the bottling, gasoline, automotive and other manufacturers. Galitos is a chain of franchise grilled chicken restaurants started in South Africa and expanded to Kenya in 2006. The restaurants specialize in Portuguese-style, spiced chicken and serve staples such as Peri-Peri as well as a American favorites like cheese burgers and wraps

What franchising is all about: Relationships

Many people, when they think of franchising, focus first on the law.

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While the law is certainly important, it is not the central thing to understand about franchising. At its core, franchising is about the franchisor’s brand value, how the franchisor supports its franchisees, how the franchisee meets its obligations to deliver the products and services to the system’s brand standards and most importantly – franchising is about the relationship that the franchisor has with its franchisees.

Brands

A franchisor’s brand is its most valuable asset and consumers decide which business to shop at and how often to frequent that business based on what they know, or think they know, about the brand. To a certain extent consumers really don’t care who owns the business so long as their brand expectations are met. If you become a franchisee, you will certainly be developing a relationship with your customers to maintain their loyalty, and most certainly customers will choose to purchase from you because of the quality of your services and the personal relationship you establish with them. But first and foremost, they have trust in the brand to meet their expectations, and the franchisor and the other franchisees in the system rely upon you to meet those expectations. In Kenya- Uchumi Supermarkets has begun testing a new franchising model ahead of a roll-out later in the year that is expected to offer private and mostly small supermarkets the opportunity to trade under its brand name as it seeks to spring back to profitability. The new business model, if successful, is likely to trigger a chain of reactions by other giant retailers, according to analysts, as it will lead to

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a scramble for the majority low-end shoppers who mainly depend on the largely informal retail industry. At least two stores running under the brand name Uchumi Xpress are already in operation, with more set to be rolled out. One is located in the middle of Nairobi’s Mwiki estate in Kasarani, where it is competing for shoppers with local shops

Systems and Support

Great franchisors provide systems, tools and support so that their franchisees have the ability to live up to the system’s brand standards and ensure customer satisfaction. And, franchisors and all of the other franchisees expect that you will independently manage the day-to-day operation of your businesses so that you will enhance the reputation of the company in your market area. When selecting a franchise system to invest in, you want to evaluate the types of support you will be provided and how well the franchisor is managing the evolution of the products and services so that it keeps up with changing consumer expectations. Some of the more common services that franchisors provide to franchisees include: • A recognized brand name, • Site selection and site devel opment assistance, • Training for you and your man agement team, • Research and development of new products and services, • Headquarters and field sup port, • Initial and continuing market ing and advertising.


BRIEFS REPORT You want to select a franchisor that routinely and effectively enforces system standards. This is important to you as enforcement of brand standards by the franchisor is meant to protect franchisees from the possible bad acts of other franchisees that share the brand with them. Since customers see franchise systems as a branded chain of operations, great products and services delivered by one franchisee benefits the entire system. The opposite is also true. Tuskys Supermarket Chain wants to be even closer to customers with its franchising model that will see small independent shops rebrand and trade as Tuskys outlets.

Tuskys CEO Dan Githua “There is someone who is running a successful retail business in Kibera (an informal settlement in Nairobi) and all they need is a bit of support to make their business more modern, support to access a wider range of products from manufacturers, and to better engage with customers. We can give that to the retailer as a package and make some money out of it, and the retailer also gets to expand their business,” says Tuskys CEO Dan Githua

Contractual Relationship

While from the public’s vantage point, franchises look like any other chain of branded businesses, they are very different. In a franchise system, the owner of the brand does not manage and operate the locations that serve consumers their products and services on a day-to-day basis. Serving the consumer is the role and responsibility of the franchisee. Franchising is a contractual relationship between a licensor (franchisor) and a licensee (franchisee) that allows the business owner to use the licensor’s brand and method of doing business to distribute products or services to consumers. While every franchise is a license, not every license is a franchise under the law. Sometimes that can be very confusing.

In the United States, a franchise is a specific type of licensing arrangement defined by the Federal Trade Commission and also by several states. In the United States a franchise generally exists when: • The franchisor licenses a franchisee the right to use its trade or service mar • The franchisor provides the franchisee with support and exercises certain controls; and, • The franchisee pays the franchi sor a fee. The definition of a franchise is not uniform in every state. Some states for example, may also include a marketing plan or community of interest provision in the definition. The definition of what is a franchise can vary significantly under the laws in some states and it is important that you don’t simply rely on the federal definition of a franchise in understanding any particular state’s requirements. Put another way, in a franchise a business (the franchisor) licenses its trade name (the brand, such as Gallitos Kitchen or Pizza Inn ) and its operating methods (its system of doing business) to a person or group operating within a specific territory or location (the franchisee), which agrees to operate its business according to the terms of a contract (the franchising agreement). The franchisor provides the franchisee with franchising leadership and support, and exercises some controls to ensure the franchisee’s adherence to brand guidelines.

Galitos is a chain of franchise grilled chicken restaurants started in South Africa and expanded to Kenya in 2006. The restaurants specialize in Portuguesestyle, spiced chicken and serve staples such as Peri-Peri as well as a American favorites like cheese burgers and wraps In exchange, the franchisee usually pays the franchisor a one-time initial fee (the franchise fee) and a continuing fee (known as a royalty) for the use of the franchisor’s trade name and operating methods. The franchisee is responsible for the day-to-day management of its independently owned business and benefits or risks loss based on his own performance and capabilities. Investing in a franchise or becoming a franchisor can be a great opportunity. But before you select any franchise investment and sign any franchise agreement, do your homework, understand what the franchise system is offering and get the support of a qualified franchise lawyer.

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BRIEFS REPORT

Ethiopia is the world’s fastest-growing economy in 2017- World Bank Report

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thiopia is the fastest-growing economy in 2017, according to the World Bank’s latest edition of Global Economic Prospects. Ethiopia’s GDP is forecast to grow by 8.3% in 2017. By contrast, global growth is projected to be 2.7%. The East African country’s accelerating growth comes on the back of government spending on infrastructure. However, borrowing to finance Ethiopia’s large public infrastructure projects has led to a rise in public debt, which increased by more than 10% of GDP between 2014 and 2016, and now exceeds 50% of GDP. Many emerging market economies have high levels of public debt, and the World Bank says it is concerned about this because it could drag down growth. Worsening drought conditions could also affect Ethiopia’s growth, says the report. The outlook for the world econo-

my Global growth is predicted to rise by 2.7% on the back of a pick-up in manufacturing and trade, improved market confidence and a recovery in commodity prices. Trade increased by around 4% in 2017, up from a post-crisis low of 2.4% in 2016. Although it is expected to remain below pre-financial crisis levels. Growth in emerging markets and developing economies As this map shows, much of Asia and Africa (in light blue) are experiencing rapid growth. Emerging-market and developing economies are anticipated to grow 4.1% – far faster than advanced economies. The fastest-growing economies Uzbekistan has the second-fastestgrowing economy, with projected growth of 7.6% thanks to rising oil prices, benign global financing conditions, robust growth in the Euro Area, and generally supportive policies among governments of several large countries in the region.

Nepal is next, with a 7.5% projection. Nepal’s growth has rebounded strongly following a good monsoon, reconstruction efforts after the 2015 earthquake and normalization of trade with India, says the Bank. India is the fourth-fastest-growing economy with 7.2% projected growth, thanks in part to a rise in exports and an increase in government spending. Among the other top 10 performers are Djibouti and Laos with 7% and Cambodia, the Philippines and Myanmar with 6.9%. China, despite experiencing a slowdown and an economic transition, was in 16th place with 6.5% expected growth, helped by robust consumption and a recovery of exports.

SOURCE: WORLD ECONOMIC FORUM

EVENTS

"Connecting Ships, Ports and People" has been selected as the World Maritime Day theme for 2017 World Maritime Day 2017 will be formally celebrated at IMO on 28 September 2017. The theme was chosen to provide an opportunity to focus on the many diverse actors involved in the shipping and logistics areas. The maritime sector, which includes shipping, ports and the people that operate them, can and should play a significant role helping Member States to create conditions for increased employment, prosperity and stability ashore through promoting trade by sea; enhancing the port and maritime sector as wealth creators both on land and, through developing a sustainable blue economy, at sea.

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Member States and other entities are invited to celebrate with activities in the same week, while other activities may be held throughout the year to highlight the theme. The aim of the 2017 theme is to build on the World Maritime Day theme for 2016, "Shipping: indispensable to the world", by focussing on helping IMO Member States to develop and implement maritime strategies to invest in a joined-up, interagency approach that addresses the whole range of issues, including the facilitation of maritime transport, and increasing efficiency, navigational safety, protection of the marine environment, and maritime security. In this way, IMO will be contributing to achieving the United Nations' Sustainable Development Goals

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(SDGs) which are a broad response to the challenges facing the world today – increasing world population; climate change; threats to the environment; unsustainable exploitation of natural resources; threats to food security; societal threats posed by organized criminals and violent extremists; and instability leading to mixed migration. Ultimately, more efficient shipping, working in partnership with a port sector supported by governments, will be a major driver towards global stability and sustainable development for the good of all people. Parallel Event 2017 The World Maritime Day Parallel Event will be held in Panama (1-3 October 2017).


BRIEFS EVENTS

24th Africa Oil Week 2017 Africa’s export markets set Conference & Exhibition to boom in the wake of ports expansion

The 24th Africa Oil Week 2017 Conference & Exhibition will be held at Cape Town International Centre, South Africa, to happen from 23rd -27th October 2017. The event provides the most trusted platform worldwide; bringing together governments, national oil companies, corporate players, independents and financiers with support from service and supply operators shaping Africa’s oil, gas and energy future. The conference portrays five days of contentrich senior level executive insights, finance and investor outlook, exposure of Africa-wide state and/or private acreage opportunities, transaction and/or new venture assets and potential, exposure of Africa-wide state and/or private acreage opportunities, exploration and production developments, industry strategies and portfolio, wand an overview of Africa’s hydrocarbon future; regarded for its high level participation, intimate networking and on-site deal-flow. Annually, more than 1,250 corporate and influential leaders and thinkers from every continent attend the flagship Africa Oil Week that attracts a key oil and gas audience to Cape Town, offering a content driven program, quality industry exhibition and five star networking opportunities. Key Highlights • Longest-running and most prominent event held worldwide in and on the Afri can Continent for its fast-growing oil, gas-LNG and energy industry news and business partnerships. • First-class networking and social interface with multiple opportunities for all to cre ate and cement relationships that will shape the future for oil and gas in Africa. • Deal-driven industry Exhibition • Sizeable in-room investor and finance potential Engage with: • Globally-diversified mix of senior-level government and corporate delegates • Substantial array of countries offering numerous exploration blocks and bid rounds • National Oil Companies and state entities • Government agencies, Ministries • Offshore exploration and production • Technology, service and supply compa nies • Oil and gas institutions, investors, finan ciers, bankers and energy lawyers • Onshore, offshore and deepwater • Advisors and consultants

African Ports Evolution Forum explores the myriad opportunities available at African ports in line with the 2040 Vision for Africa’s transport sector. There are two event forum editions • West Africa hosted by Ghana Ports and Harbor Authority to be held between 5-7 September 2017- Accra Ghana. • Durban South Africa 17-18th October at the Durban International Convention Centre. With Africa’s overall port utilisation capacity now exceeding 70%, ports authorities and terminal operators are actively calling for partners in development to equip Africa’s ports and harbours for post-neo-panamax shipping requirements. As international trade volumes increase at growth rates of 6-8% per year, expansion projects in Africa follow suit and gain momentum. Trade facilitation and port reform aim to propel Africa’s export markets to compete on a global stage. The establishment of modern and efficient seaports has climbed to the top of Africa’s transport agenda to enable port connectivity and increase cargo throughput so much so that port and corridor expansion is not only creating new business opportunities for port city development across the sub-Saharan region but now also opening up new access to hinterland areas and strategic trade corridors. Port expansion and upgrade projects currently underway across Africa are valued in the billions. The value of ports projects underway in Tanzania currently total US $13.6 and Mozambique has already witnessed investments of US $8.3 billion towards ports upgrade and expansion in 2017 alone. African Ports Evolution Forum explores the myriad opportunities now available for the generation of new revenue streams at African ports through concessions, systems upgrades, expansion projects and more, unlocking qualified channels for ports’ respective development pipelines in line with the 2040 Vision for Africa’s transport sector. The 2040 Vision for Africa’s transport sector is an integrated African continent where transport infrastructure and services enable the free movement of goods and passengers by providing efficient, safe, secure, reliable and seamless transport options. The African Ports Evolution forum takes place in Accra Ghana 5-7 September 2017 VISIT: www.west.portsevolution. com and Durban, South Africa on 17 and 18 October 2017.

More information is available at www.portsevolution.com

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MINING

Bolloré Logistics Kwale based miner to put up about Kshs wins Burkina Faso’s gold mine 3b plant in 2018 construction contract

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ase Titanium is planning to invest 2.7 billion shillings in a new plant to boost production of the commodity. Already the company has received all the necessary approvals to start phase two that will double the company’s output. According to Joe Schwarz the company’s external affairs manager, last year the company paid loyalties amounting to 450 million shillings to the national treasury in 2016. The global demand for Ilmenite and Zircon has jumped by more than 50 percent in the last two years due to high demand on the global market and slackening production in key producers of India and China. According to Schwarz, this has seen the price of Ilmenite jump 130 percent in the last one year, boosting smaller producers. He says, “In order to meet projected demand, Kwale based miner Base Titanium plans to invest more than 2.5 billion shillings in a new plant in Kwale in a bid to boost expected demand on the world market. The new plant is expected to be operational by the end of next year.” Base Titanium which is the biggest miner in the country produced a total of 155 thousand tonnes of Ilmenite, Rutile and Zircon in the second quarter of 2017 has also increased exploration activities around the Tanzanian border and has applied for an operating license in Tanzania to boost its regional presence. Shwarz says after the company remitted loyalties amounting to 450 million shillings, the `figure is expected to grow further with improved prices and shipments. However, the company is lamenting the slow value added tax refund process by the Kenya Revenue Authority (KRA) totaling to 2 billion shillings for capital expenditure on its factory in Kwale. In the second quarter the company received a total of 30 million shillings worth of VAT refunds from the taxman.

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olloré Transport & Logistics has been appointed to coordinate and manage the construction of Burkina Faso’s 10th mine, where work began in July 2016. Operated by Houndé Gold Operations, a subsidiary of the Canadian Endeavour Mining group, the Houndé site is one of the largest mining projects in West Africa. The contract includes international transport, customs transit formalities and delivery of all of the mines construction equipment, through its subsidiaries Antrak Logistics Australia, Bolloré Transport & Logistics Ivory Coast and Bolloré Transport & Logistics Burkina Faso. Houndé Gold Operations boasts an integrated door-todoor logistics solution made possible by the strong global presence of Bolloré Transport & Logistics and its extensive integrated logistics network. The Group’s local branch in Bobo-Dioulasso, which was less than 100 km from the mine site, would remain the project office. Ideally located within close proximity to Bobo- Inter, Customs and Cotecna’s offices the decision to boast resources in Bobo Dioulasso proved to be a key factor for the groups’ appointment for the construction contract. The project team consists of six dedicated personnel, who are responsible for the clearance and delivery of goods to site. Bobo Dioulasso also allowed the project team to visit site for regular meetings with the client team and significantly reduced transport costs in the process, ensuring that operational deadlines and stringent KPIs were achieved. Bearing in mind that the ‘On-time / On-budget’ principle is of paramount importance in the industry and it is therefore a major milestone that the project to date is ahead of schedule. To date, Antrak Logistics has consigned 147 tons of airfreight, 1,375 TEUs and 9,750 Freight tons of project cargo for the Houndé Gold project, and all without any work accidents being reported. Having established a close working relationship with both the EPCM contractors Lycopodium Minerals, and the project owners, Endeavour Mining on previous construction contracts, Bolloré Logistics and its subsidiaries were able to understand critical paths, extremely tight construction schedules and pre-empt seasonal influences affecting the availability of trucks during the country export season. In this case, Bolloré Transport & Logistics Ivory Coast was able to launch dedicated block trains through Sitarail, one of the Group’s railway concessions, to transport containers via rail from Abidjan port to Bobo-Dioulasso Inter. So far, Sitarail has dispatched nine dedicated block-trains each consisting of up to 50 TEUs per train. Communication and pro-activity have been one of the key strategies which will ensure that the Houndé Gold Operation will meet the principals’ delivery schedule. Antrak Logistics & Bolloré Logistics are pleased to have been a contributor to this project.

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ENERGY

Lexo Energy to open up petrol stations in Kenya

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airobi, Kenya has become the second African nation after Mauritius after an international company, Lexo Energy decided to invest in its energy sector. Lexo Energy from Netherlands has started its operations in Kenya where they are to open up to 25 new petrol stations this year. Lexo’s Kenya office branch can be

found along Riara Road, it focuses on upstream operations. “We plan to have between 15 and 25 petrol stations before the end of the year,” Lexo Energy Nairobi office manager Koki Mulwa said on phone. They have two existing stations in Western towns of Mumias and Busia, and recently they’re to expand their operations in Nairobi and other big towns.

Lexo Energy, however, did not disclose its expansion budget, but estimates from the energy sector regulator put the cost of a stocked petrol station at about Sh100 million. This means the new 25 stations could cost Sh2.5 billion. This comes when Anglo-Dutch firm Shell, also headquartered in Netherlands, is exiting the local retail market with the planned sale of its stake in Nairobi-based Vivo Energy— Shell licensee in 16 African markets. Shell plans to sell off its remaining 20 per cent stake in Vivo Energy to Vitol, another Dutch company, for $250 million (Sh25.7 billion) in its divestment process that began in 2011. Last year, Kenya had a total pf 75 oil marketing companies which import petroleum, retail at the pump and reexport some of their cargo to Uganda and Rwanda. The oil marketers have in the recent past complained of thin margins despite an upward trend in operation costs. The current margins of Sh7 a litre for wholesale and Sh3.89 for retail were last reviewed upwards three years ago.

KETRACO transmission infrastructure projects In Isiolo and Garissa

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enya Electricity Transmission Co. Ltd. plans to put up an additional 7,000 km of electricity transmission lines in five years. This will enable reduction on over-reliance on diesel-generated power in areas that are not covered by the national grid. A 285-kilometre line will be built and associated sub-stations between Garissa and Isiolo. China CAMC Engineering has won the 13.6 million tender contract to construct a high-voltage power transmission line between Garissa and Isiolo, firming up a trend where Beijing firms are emerging clear favourites in big contracts. “The project involves constructing a new 285km 220KV electricity transmission line and three converting stations,” said the Chinese firm in the statement.

Export-Import Bank of China will fund the project. Senior Technical adviser John Mativo said the infrastructure will boost power supplies along the Lamu Port South Sudan Ethiopia Transport corridor from Garissa, Garba Tula and Isiolo. “The project also allows wind and solar power plants to be constructed in that rich renewable energy area and (creates) alternative paths for supply of power to Isiolo and Garissa by reinforcing the grid,” said Mr Mativo. Ketraco is implementing projects totalling about 5,000km of transmission lines and regional power interconnectors of different voltage levels expected to be completed in the next three to four years. The transmission infrastructure projects will facilitate electricity evacuation from generating stations, reinforce the grid network for increased capacity and reli-

ability as well as provide redundancy. There have been lots of challenges facing the energy sector such as weak power transmission and distribution infrastructure, high cost of power, low per capita power consumption and low countrywide electricity access. The transmission projects are expected to enhance capacity for evacuating power from generating plants and build inter-connectors to facilitate regional power trade with neighbouring countries. The projects are financed by the exchequer, development partners, financial institutions and public-private partnerships (PPPs). Chinese firms have gobbled up most of the large projects ranging from highway construction to Standard Gauge Railway mainly thanks to large financing muscle by Beijing.

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AVIATION ROUNDUP

Britex Air offers two-return flights on Nairobi-Kisumu route

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ritex Air Services, a start-up airline, will have two return flights on the Nairobi-Kisumu route at 6.45am and 6pm and return to Nairobi shortly after landing. When demand picks, they will increase their frequencies. The start-up airline is to launch its maiden flight, this will step up competition for established carriers such as Jambojet, Kenya Airways and Fly540 who operate on the route. The 30-seater Embraer 120 was acquired from Brazil, it takes off today from Wilson Airport and will operate two return flights per day. Dick Opiyo the managing director of Britex, , who is also a former manager at the defunct Jetlink Express said that the airline has partnered with Reliance Air Charters that will provide crew to the two planes and service them. “Our target market is the

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One of the planes to be operated by Britex Air Services

businesspeople who want to fly to Kisumu or to Nairobi for the day, do business, and still have ample time to catch the return flight home,” he said in an interview. “To begin with, we shall have two return flights which leave our Wilson Airport base at 6.45am and 6pm and return to Nairobi shortly after landing. When demand picks, we shall increase our frequencies.” A spot-check by of the airlines’ online booking portals shows that a one-way Britex ticket from Nairobi to

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Kisumu on July 30 will cost a minimum of Sh5,200, inclusive of taxes. A similar trip on Kenya Airways, Jambojet (its low-cost subsidiary) and Fly540 is going for Sh7,635, Sh4,200 and Sh6,770 respectively — making ticket prices a potential point of rivalry. These prices vary as the date of travel nears and available seats. “Soon we intend to introduce Kisumu-Mombasa with short stop overs in at Wilson to pick or drop off passengers,” said Mr Opiyo.


AVIATION ROUNDUP

Kenya launches Sh 2.5 billion new ultra-modern international airport

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he Government of Kenya has commissioned the fifth International Airport, opening up the northern tourist circuit to help increase the number of visitors in the country. Isiolo International Airport which is developed and managed by the Kenya Airports Authority (KAA), is expected to promote development in the vast region. The new airport, which is aimed at unlocking regional economic potentials, is strategically located for miraa (khat), beef and fresh produce exports from Kenya's Lower Eastern region. The ultra-modern airport, which is located in Isiolo County with half of the runway extending to Meru County, covers an area of 329.76 hectares and is elevated about 3501 feet above sea level. The project involves a Passenger Terminal Building covering a floor area of 4,800 sq. m. and with a throughput capacity of 125,000 passengers annually. Its runway is 1.4 km long with a new apron that can handle six Code "C" aircrafts. Its passenger terminal building has a floor area of 5,000 square meters while its passenger terminal car park has a capacity to accommodate 200 cars. According to President Uhuru, the airport, which is part of the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) Corridor project, will also boost the economy for the benefit of the residents. "This airport is a catalyst to economic development that will come with the expansion of tourism and creation of quality job opportunities," he said. LAPSSET is an economic and transport corridor that stretches from Lamu port in the coastal Kenya to South Sudan and Ethiopia. Its passenger terminal building has a floor area of 5,000 square meters while its passenger terminal car park has a capacity to accommodate 200 cars. The terminal building amenities include nine check-in counters (domestic and international), a VIP lounge, and restaurants, duty free shops, banking facilities, forex bureaus, airline front offices and shops. President Kenyatta said the airport

will open up access to the beautiful northern Kenya tourism attractions, which include eco-tourism, rich cultural heritage, national reserves, private ranches and wildlife conservancies. Under Vision 2030, Kenya's long term national development plan, Isiolo has been identified to host one of the five resort cities that will be set up as flagship projects. Kenyans and foreign visitors will now be able to fly to the Northern parts of Kenya. The airport was scheduled to for commissioning early this year but did not happen due to runway pavements being worked on due to poor drainage. “A lot of investments have been put in place for the construction of the airport and it now operational has reached a level where we feel we are ready to start operations,” said the Transport PS Paul Maringa According to officials the Airport is be able to handle large aircraft that can reach Middle East markets in four hours. They include Airbus A300 to A380 and Boeing 747 to 787. It’s expected to change the lives of the residents as the economy of the area will be uplifted.

The area residents say since the project kicked off, most of them now connected to electricity, roads have been paved and high-rise buildings are coming up. They say already camel-and-cow-milk processing plant and a modern abattoir are being constructed by donors. Kenyatta “We want the communities living around this place to benefit from the project as that is the main agenda of construction the project in the area. This is one of the project that is being funded by the Kenyan government being implemented in Isiolo and it’s expected to change the lives of the area residents.” Since the project kicked off the area has been witnessing positive changes such as improved road networks, electricity connection and that is expected to double up once it will be launched. Isiolo International Airport will be the first Airport in Isiolo County. The airport is expected to promote growth and unlock the economic potential of the region and the neighbouring pastoralist areas.

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AVIATION ROUNDUP

Etihad increases its flights to Egypt and Nigeria

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he Airways is adding yearround flights between its Abu Dhabi hub and both Cairo and Lagos later this year, to cater for growing demand to and from the United Arab Emirates. It will introduce a fifth daily service on the Cairo route from October 1, 2017, taking flight frequency to the Egyptian capital up from 28 to 35 flights a week. The new mid-morning departure from Abu Dhabi and return afternoon service out of Cairo will offer local guests in each market additional choice travelling between the two capital cities. Etihad Airways will cater to demand with additional frequency on the Cairo route before making the fifth daily service permanent in October. The new service will also provide convenient connections in Abu Dhabi to and from key cities in North and South Asia, including Beijing, Hong Kong, Shanghai, Jakarta and Kuala Lumpur. A new Saturday flight to Nigeria’s commercial capital of Lagos, beginning on December 2, 2017, adds to the weekend travel option, increasing frequency from four to five services each week, and offering greater flexibility and convenience to local travellers. The early morning service from Abu Dhabi and return mid-morning flight departing Lagos will also ensure convenient connections to and from Asia and the Indian Subcontinent. Popular feeder cities include Bengaluru, Chennai, Delhi, Mumbai and Kuala Lumpur.

Etihad in Egypt

Etihad Airways will cater to demand with additional frequency on the Cairo route before making the fifth daily service permanent in October.

Etihad in Nigeria

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On the back of Nigeria and Egypt’s resurging economies, the airline sees the frequency increases to both markets as timely to provide guests with greater choice. Bilateral trade between the UAE and Egypt totalled $400 million last year. GDP growth in Egypt is expected to be 3.5 percent this year, rising to 4.5 percent in 2018. Tourist arrivals into Egypt are forecast to increase from last year’s level of 5 million to 5.4 million this year, and to almost 6 million in 2018. Nigeria’s GDP growth rate is expected to more than double from 0.83 percent this year to 1.9 percent in 2018 largely due to the expanding manufacturing, financial and IT sectors that are helping fuel demand for more international air capacity. Mohammad Al Bulooki, executive vice president – commercial, Etihad Airways said, “Cairo is the largest point to point market from Abu Dhabi enjoying an increase in tourist traffic to Egypt. Our additional flights demonstrate the importance of the strong historic ties between the UAE and Egypt, and our continued support of the growth of bilateral trade and Egypt’s tourism industry. “Lagos is one of our largest direct markets in Sub-Saharan Africa that is showing signs of strength as Nigeria recovers from recession. Against this backdrop, our additional flights will help facilitate the growth. With the convenience of Abu Dhabi’s geographical position, we are providing timely flight connections between our capital city in the UAE and both Cairo and Lagos for the benefit of our travellers and the movement of freight.”


PORTS AND SHIPPING

Government reviving Kenya National Shipping Line to tap Ksh 300B potential

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he Government has announced plans to revive the Kenya National Shipping Line that has the potential to contribute Sh304 billion into the country’s economy annually. The revival of the shipping line is expected to return Kenya to its historical place as a rich seafaring nation with highly respected seafarers. The initiative is expected to create an average of 3,000 job opportunities for youth in the first year, and thereafter progressively increase to 6,000 in five years. State House Spokesperson Manoah Esipisu said on Sunday that the State Department of Maritime and Shipping Affairs, through its Blue Economy Committee, has rolled out plans to restructure the ownership of the KNLS. “Negotiations are at an advanced stage for the exit of foreign shareholders who have expressed desire to cease working with KNLS, due to KNSL having become a parastatal” said Mr Esipisu when he addressed the press at State House, Mombasa. Mr Esipisu said the revival of the the shipping line, which has been dormant for decades, is part of the Jubilee Administration’s wider plan to boost the economy of the coast region as well that of the whole country. “This administration has invested billions of shillings in this region to build or improve security, infrastructure and general service delivery, with the simple goal of uplifting the live of residents in an inclusive way,” said Mr Esipisu. The State House Spokesperson used his press briefing to speak on the wide ranging development initiatives that have been rolled out in the region and more that are in the pipeline. President Kenyatta was in Taita Taveta County on Saturday to launch the tarmacking of the 56 kilometer Bura – Mtwamwagodi Road. “The Jubilee Administration is also set to implement the Mzima II water project in the next financial year at a cost of Sh35 billion…. It will address the perennial water shortage and serve the areas of Voi, Wundanyi,

Taveta and Mwatate while the excess water will serve the people of Kilifi and Mombasa,” said Mr Esipisu. Also top on the Jubilee Administration’s development agenda for the coast is the expansion of Malindi Airport at a cost of Sh700 million. The Spokesperson said the Government will invest many more billions of Shillings in the construction of the Lamu Port, which is the anchor of the LAPSSET corridor project. “Additionally, the 485 kilometer Isiolo – Moyale road (Ethiopia Link) has been completed at a cost of Sh50 billion. This road forms 27 percent of the LAPSSET Corridor road,” said Mr Esipisu. As part of the Jubilee Administration’s efforts to spur growth in the region through transformational projects, the Kenya Ferry Services has undergone refurbishment and expansion. Tomorrow, President Kenyatta will officially launch the resumption of Mtongwe ferry services. On the Standard Gauge Railway, Mr Esipisu said Kenya Railways will receive 200 freight wagons, three passenger locomotives and other equipment in the coming week. He also revealed that 35 students left the country last month to start a 4 year Railway Degree Programm at Beijing Jiatong University in China. “We are still on schedule for the handover and the first train will run by 1st June 2017,” said Mr Esipisu.

He also pointed out that the Mombasa Port has undergone significant transformation under the Jubilee. Administration. “There has been an increase in the number of berths, improved efficiency of management of the port that has resulted in significant increase of the container throughput,” he said. The Government will also expand Ukunda Airport so that it can open up the economy of Kwale County. The Ukunda Airport runway is being extended to 2 kilometers in length and a width of 30 meters. A new terminal building will be constructed to meet demand and the. Apron will be expanded to accommodate larger aircraft. The State House Spokesperson also spoke extensively on infrastructure projects in the coastal region. He said currently, the Government has embarked on a project to increase the number of Low Volume Seal Roads in the region. A total of 601 kilometers of Low Volume Seal Roads will be constructed at a cost of. Sh25.7 billion, said Mr Esipisu. President Kenyatta will launch the construction of Kinango on Monday -Samburu Road and also Mariakana – Bamba road. He will later return to Mombasa to inspect the ongoing construction of Airport- Changamwe Road.

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PORTS AND SHIPPING

India’s solar-powered makeover trains

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he next time you travel by train your coach is likely to be powered by the Solar Panels for supplying power to the Lights, fans, Air Conditioners, charging points etc. India has launched solar-powered trains that will save around 21,000 litres of diesel every year. The train left Safdarjung Station in south Delhi pulling six carriages topped with PV panels to meet the needs of its electrical systems with clean energy. The solar-powered train was launched on July 14th, rooftop solar panels have been installed to power the lights, fans, and information display systems inside passenger coaches. Although the train will still be pulled by a diesel-powered locomotive, a set of 16 solar panels atop each coach will replace the diesel generators that typically power these appliances. The project is part of an effort by Indian Railways to reduce the carbon footprint of its diesel-reliant train network, a plan that includes the building of five 1,000 MW solar plants over the next 5 years, as well as making use of bio fuels and wind energy, installing bio-toilets, and recycling water. The rooftop solar system was developed by Noida-based Jakson Engineers, under the direction of the Indian Railways Organisation for Alternate Fuels (IROAF). “It is not an easy task to fit solar panels on the roof of train coaches that run at a speed of 80 km per hour. Our engineering skills were put to a real test

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during the execution of this rooftop solar project for Indian Railways,” Sundeep Gupta, vice-chairman and managing director of Jakson Engineers told the Business Standard newspaper. Established in 2008, the IROAF initially focused on bio-diesel and compressed natural gas (CNG) to help diversify Indian Railways’ fuel mix, before looking at solar. Indian Railways has ambitious plans for solar. By 2020, the staterun transportation network plans to generate around 1,000 megawatts (MW) of solar power, which could be scaled up to 5,000 MW by 2025. These numbers are not only significant for the railways, given that it’ll help bring down the fuel bill, but will also impact India’s overall renewable energy goal of 175 gigawatt (1 GW = 1,000 MW) by 2022.

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The first of these trains will be pressed into service on the suburban railway network of New Delhi, one of the world’s most polluted cities, before two dozen more coaches are fitted with similar rooftop solar systems. Retrofitting each coach with these system, including an inverter to optimise power generation and battery for storing surplus power, costs around Rs9 lakh. Built by former British colonial rulers, the railway system is one of the world’s largest and is still the main means of long-distance travel in the country. But years of financial neglect and a populist policy of subsidising fares have hit the network hard. Prime Minister Narendra Modi vowed to revive it after coming to power in May 2014.


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Procurement and Logistics Magazine August 2017  
Procurement and Logistics Magazine August 2017  
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