Logistics companies reeling from Covid-19

The world is grappling with the Covid-19 pandemic that continues to snuff out lives across the globe. The disease has also paralysed trade and businesses, pushing economies to the brink of collapse and crashing stock markets globally.

The transport and logistics sector is a major victim of Covid-19. The industry facilitates cargo movement to different geographical locations, supports key economic sectors such as manufacturing, agriculture, aid and relief, construction and education, among others. However, Covid-19 has made it extremely challenging to move goods, affecting trade between regions.

According to the International Air Transport Association (IATA), the aviation sector supports 6.2 million jobs in Africa or 2.6 per cent of Africa’s GDP. However, since January 2020 over 185,000 pax have cancelled flights and vital cargo capacity disappeared. This has a negatively affected the air freight sector whose goods primarily comprise pharmaceuticals, chemicals, flowers, vegetables and fruits.

Flower exports to key markets such as the European Union (EU) have dropped by over 50 per cent due to the financial crisis caused by the Covid-19. The Dutch auction has been operating below capacity, making some farms to suspend shipping of flowers.

In Kenya, perishable exports have taken a huge beating following last minute flight cancellations. In one instance, 10 tonnes of fresh export flowers went bad due to these cancellations, resulting in a loss of approximately $120,000. Farmers have been disposing flowers worth millions of dollars for lack of market while workers are being sent home.

Foreign exchange

Export flowers are among Kenya’s leading foreign exchange earners and the impact of these cancellations will be felt all the way to the exchequer. Shipping from China to Kenya has reduced drastically with over 37 vessels being cancelled. These cancellations have affected cargo throughput at Kenya Ports Authority (KPA) and subsequently the supply chain with the Standard Gauge Railway (SGR), which hauls cargo from the Port to the Inland Container Deport (ICD), being the most affected.

This situation has been described as the worst in KPA’s history, a reflection of Kenya’s overreliance on Chinese imports which average 40 per cent of the total port imports. The subsequent impact of these cancellations is a decline in cargo handled at the port as well as in revenue collection by the customs authority.

The SGR is yet to settle its loan to the Chinese government. The debt was supposed to be paid through the income collected via SGR from the Mombasa Port and ICD business. This deferral by the Covid-19 is most unwelcome and will jeopardise the Kenya’s ability to pay the loan.

Low inventory

The manufacturing sector has been negatively affected due to its reliance on Asian countries as the source of most intermediate inputs for manufacturing. As the epicentre of the Covid-19 outbreak, some factories in China have been shut to contain the spread of the virus. Subsequently, countries which relied on China for inputs are operating on low inventory or have been paralysed altogether. Reliance on Chinese expertise in the manufacturing sector has also been affected by travel restrictions, thus stalling production. As the world’s manufacturing capital, it is indeed true that when China sneezes, the world catches a cold.

Intra-Africa trade has also taken a hit due to closure of borders among neighbouring countries. Uganda closed its border with Kenya after its first case of the Covid-19 was announced. The move left commuters and truck drivers stranded.

Alexandre de Juniac, IATA’s Director General and CEO aptly states: “Today, as we fight a global health war against Covid-19, governments must take urgent action to facilitate air cargo. Keeping cargo flowing will save lives.” The impact of the Covid-19 continues to be felt across global markets and the aftershocks will be felt into the foreseeable future. The pandemic has now more than ever highlighted the trade interdependence amongst countries and questioned the strengths and weakness of markets traditionally referred to as superpowers in the face of crisis of this nature.

It also highlights the critical role logistics entities play in the restoration of markets and trade through the provision of relief supplies such as pharmaceuticals, PPEs and in worst hit areas –  food.

The Covid-19 pandemic has reaffirmed the critical role that efficient supply chains play in resolving global crises such as this one and restoration of trade and economies.

- Ms Nduta is the Group Marketing and Communications manager at Siginon Group.