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November 15, 2018

Acute warehouse shortage plagues Kenyan companies

Verification officer Titus Ojore of Tusome Project inspects part of 5.4 million copies of English and Swahili books at Balore Logistics Warehouse in Embakasi on April 14, 2016. /JACK OWUOR
Verification officer Titus Ojore of Tusome Project inspects part of 5.4 million copies of English and Swahili books at Balore Logistics Warehouse in Embakasi on April 14, 2016. /JACK OWUOR

Kenya is experiencing an acute warehousing shortage that could hinder growth of the country’s struggling manufacturing sector which heavily relies on warehousing for storage and distribution.

Tilisi Development Limited survey released last week shows that out of 52 companies polled across Kenya’s manufacturing, Fast Moving Consumer Goods, pharmaceuticals, logistics, import, export, retail and e-commerce sectors, 62 per cent have experienced some kind of warehousing shortage in the recent past.

The report further revealed that 35 per cent of companies are forced to rent out extra space, with 10 per cent of them forced to deliver goods directly to their clients’ premises rather than storing them, incurring extra costs.

The report further revealed that six per cent of companies have no solution to the warehousing shortage.

It further faulted the available warehousing facilities, saying they are not up to the ideal standards.

The manuacturing sector, which contributes 10-11 per cent of the nation’s Gross Domestic Product recorded a slight improvement of 9.37 per cent in the first quarter of 2017, contributing Sh11.57 billion to the GDP, compared to Sh10.56 billion registered the previous quarter, according to recent data by the Kenya National Bureau of Statistics.

The government has invested up to $2.7 billion (Sh270 billion) in infrastructural projects under Vision 2030 Second Medium Term Plan 2013-2017.

The companies polled reported constraints caused by the quality of their warehousing, with 60 per cent of users spanning both warehouse owners and warehouse tenants, highlighting quality issues.

Problems highlighted include poorly ventilated spaces, leakages, power shortages, and poor structural planning, causing difficulties in accessing goods within the warehouse.

Respondents lamented that this has increased the rate at which stock is getting contaminated, and in cases where food and flowers were stored, it accelerated their deterioration.

International logistics companies also reported that modern, well-configured logistics space and height were scarce, with the majority of Kenya’s warehousing currently falling short of international standards.

They said it is constructed for use by small traders rather than by large companies.

“Kenya has experienced exponential growth in various sectors of its economy and population. Yet, this has been in contrast to the slow growth of quality warehousing to support and sustain it. This has led to a country experiencing a demand that is vastly outstripping its supply,” said Kavit Shah, CEO of Tilisi Development Limited

The Logistics Africa 2016 report by Africa Logistics Properties said Africa should expect an increase in demand for warehousing facilities fueled by its vibrant e-commerce sector. Kenya’s e-commerce, which was valued at Sh4.3 billion in 2015 by the Communication Authority, has since grown, thanks to high internet penetration estimated at 82.6 per cent.

However, investment in warehousing remains low. The 2017 Nairobi City County Permit Activity Reports from the Kenya Property Development Association reported 2,303 planning permits approved by Nairobi last year. Of these, only 199 were in the warehouse class, while commercial properties registered 809 applications.

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