Kenya does not have adequate warehousing facilities in the right places.
Kenya does not have adequate warehousing facilities in the right places. Most of what it has for goods storage are either substandard stores or warehouses that are built in wrong locations, shows a market survey released last week.
A warehousing market study conducted by Tilisi Development Ltd shows most of the facilities that traders and producers rely on as warehouses lack adequate space, are in wrong locations or simply have unsuitable infrastructure.
The survey raises health concerns as food and beverages account for nearly one-third of goods that exchange hands in places like Ghana, Kenya and Nigeria, according to a recent report released by McKinsey & Company.
Going by the Tilisi survey, demand for warehousing facilities is on a steep climb with 16 per cent of respondents having sought the services in 2017/2018 compared with nine per cent the previous year. Only six per cent required warehousing in 2015/2016, and five per cent in the two years prior to that.
“In the last five years, more than a third of respondents had sought new facilities. However, more than half of those searches have been in the last one year,” the survey shows.
From the survey, almost a fifth of manufacturers in Kenya have lost sales in the past five years on a warehousing shortage, a challenge that is only getting worse.
Of the companies seeking warehousing in the last five year, 31 per cent of the total respondents cited goods damage as a result. Some 43 per cent reported delays in meeting orders, while 29 per cent reported lost sales.
A further 14 per cent said the difficulty and longevity of their search for new space delayed their expansion plans.
“Kenyan GDP is being hampered excessively by the difficulties involved in finding new space for storing and sorting goods for distribution,” said Ranee Nanji, co-chief executive of Tilisi Development Ltd.
The business impact of the shortage was sharpest in manufacturing, a sector since made one of the pillars in the government’s ‘Big Four Agenda’ for development. The greatest pent-up demand was found in the pharmaceutical industry, the survey shows.
The pharmaceutical industry has the highest need for new warehousing in the last three years, with 71 per cent of industry respondents having searched for new warehousing in the last five years, and 43 per cent of those in the last one year.
Pharmaceutical products normally require high grade warehousing that is temperature-controlled, often with cold storage facilities.
The logistics and fast-moving consumer goods (FMCG) industries have also both been held back by warehousing shortages, with 30 per cent of respondents in both sectors having searched for the storage facilities within the last three years.
The FMCG sector, made up substantially of local manufacturers, reported one of the higher rates of search for new warehousing at 30 per cent in the last three years, and the highest impact in lost sales.
However, it is only the horticultural sector that planned 100 per cent of its storage based on current needs and used its own space for extra storage as it searched for new options.
This made the sector report zero product impact from warehouse shortages and searches.
The survey shows that of the respondents polled by Tilisi Development Ltd, 27 per cent said they had a problem with accessing warehouses, while 20 per cent cited location and a further seven per cent cited a combination of both.
Another seven per cent named access and water as their greatest warehousing issues.
“For almost two-thirds of respondents (61 per cent), access and location were key issues creating problems in their current warehousing,” the report shows.
The shortage has also led to rise in rental rates.
The rents have been rising by 2.8 per cent between 2013 and 2015, and by 11.5 per cent between 2015 and 2017, as the country’s warehousing shortage deepened.
The Tilisi Survey was carried out across three weeks in June 2018, with 200 respondents sampled, of whom 56 completed full interviews and provided comprehensive responses. The interviews were conducted with company directors and operational managers across five industry sectors – manufacturing, pharmaceuticals, horticulture, logistics and retailers.