Why cargo big boys are still betting big on trucks
By Peter Theuri | November 17th 2020
With Kenyan roads awash with haulers, out-of-gauge (OOG) cargo handlers are cashing in on a niche away from the competition.
OOG cargo is anything that cannot be loaded into a typical six-sided shipping container because it is too large, and requires specialised handling.
Mitchell Cotts is one of the country’s OOG cargo handling firms, and managing director Daniel Tanui said their target market remains largely untapped as the players in the field are few.
“There are goods that trucks cannot handle. This means that we are still very much in business,” said Tanui, adding that the super-sized cargo they handle includes boilers, transformers, and train wagons and engines.
The firm, which set up in Kenya in 1905, has 40 heavy-lift trucks, and among its defining operational events is the completion of the first phase of the standard gauge railway (SGR) from Mombasa to Nairobi.
The firm moved its headquarters from the coastal city in January this year into an establishment at the Jomo Kenyatta International Airport cargo terminal in Nairobi’s Embakasi area. The firm has positioned itself to tap the opportunities arising from the railway line.
“Trains used to run on coal. That is what brought us to Kenya back in 1905. Now, the SGR train has moved us from Mombasa,” said Tanui, who became the firm’s MD in 1995.
“We came to Nairobi because most corporates, which are our main source of business, are in Nairobi. As such, it is easier to meet the senior management of such companies if you are based near them. Also, we are a regional company, and Nairobi offers a more central location.”
Take a quick survey and help us improve our website!Take a survey
The use of the SGR services to haul cargo from the port of Mombasa to Nairobi has meant most trucking firms have had to re-engineer their business to survive, and focus more on last-mile connectivity from businesses to the train station or container depots.
The train service has brought with it new opportunities for logistics firms that serve a niche. Mitchell Cotts, despite shifting its base to JKIA, still maintains three container handling facilities in Mombasa in addition to one in Nairobi. These facilities have cold rooms and other equipment for specialised goods like horticultural products, which are highly perishable, and unusually heavy cargo.
“Tea, which is Kenya’s key export, requires very specialised handling. We have coolers that preserve it in the best possible condition. The people we export to are very sensitive about quality, and we would lose the market if our tea quality were wanting due to poor storage,” said Tanui.
But like many other businesses, the logistics sector has felt the negative impact of Covid-19.
In the wake of the pandemic, companies that handle large cargo, mainly targeting the export and import markets, experienced a sharp decline in business due to travel restrictions that saw countries close borders to limit the spread of the deadly virus.
Those that also offer warehousing services additionally saw a decline in demand after the production of key exports, such as tea and flowers, dwindled due to a lack of market. This forced several businesses to lay off some workers.
Further, despite getting special licences from the government to operate during curfew hours, the dip in demand for haulage services meant these businesses had to cut back from 24-hour operations.
Indeed, at the height of movement restrictions in the second quarter of the year, the value of the goods and services produced within the country dipped by 5.3 per cent, according to data from the Kenya National Bureau of Statistics.
Tanui said difficulty in accessing neighbouring countries due to strict regulations at the border also greatly affected logistics companies, lowering their productivity.
At the Kenya-Uganda border at Malaba, for instance, drivers complained of long queues due to Covid-19 containment measures as they waited for clearance from government officials.
“We used to do three to four trips to Uganda in a month. Now we barely make two,” Tanui said.
Operators had hoped the coming of the agreement establishing the African Continental Free Trade Agreement (AfCFTA), which came into force on May 30 last year, would ease the business environment in the region, but its operationalisation in July has been pushed to January due to Covid-19.
Further, with Kenya increasingly looks East to China, when the Asian nation shut its manufacturing hubs earlier this year, logistics companies saw operations dip drastically as the volume of imports reduced.
“Sectors directly affected at the onset caused a huge ripple effect on airlines, manufacturing, and government, private sector and personal projects,” said Tanui.
“Supply shocks in China in February and the demand globally exposed weaknesses of production strategies and supply chains that were unknown before.”
Clients reduced or halted orders for haulage companies, translating into idle operating capacity for the companies. To stay afloat, they have been forced to remodel their businesses.
“We have taken the time to review our service offering and undertake some upgrading of systems and technologies to improve our product offering. We are also shifting traditional logistics methods as Kenyans resorted to home supplies,” said Tanui.
In its 115 years of existence, Mitchell Cotts has grown from a clearing and forwarding firm to one that offers warehousing, air freight and transportation services.
Before Covid-19, the company had more than 1,000 direct employees and tens of thousands others depending on it through the supply chain. At the height of the pandemic, it was forced to scale down operations, which meant staff numbers had to be reviewed.
But the reopening of the economy has seen things normalise somewhat, with the company now planning on expanding its operations with the opening on a new cold room at Tatu City.
This, Tanui said, is expected to help bridge the gap between farmers and buyers in the region.
“We are looking forward to adding value to farm produce by 2021. Also, to bridge the gap between farmers and buyers, we shall establish satellite stations around the country where we will buy and store farmers’ produce before sale to avoid it going to waste before reaching buyers,” he said.
The firm will be banking on warehousing receipting, which will allow farmers to deposit storable goods in exchange for a document as evidence that specified produce of a stated quantity and quality have been deposited at a particular location. This, Tanui said, will ensure farmers are paid in a timely manner.
Nyeri tycoon accused of son’s murder dies
- Key suspect in Jennifer Wambua murder arrested
By Brian Okoth
- Ruto reacts to BBI vote outcome
- Linturi was arrested for fraud: Matiang’i
By Fred Kagonye
- Ebola drug treating Covid-19 ‘in two days’
HEALTH & SCIENCE
- Four killed in Gilgil road accident