By David Onjili
In the early days of June 2018, Tilisi Development Limited carried out a survey with 200 respondents to analyse the warehousing demands the nation faces, the findings of which pointed that Kenya does not have adequate warehousing facilities in the right places. For existing ones, they are either substandard or located in the wrong areas characterized by poor infrastructure.
More important, noting that food and beverages are the main items stored in these warehouses, the survey raises several health concerns that touch on handling and hygiene.
Company directors and operational managers across five industry sectors were involved.
Size, ownership and cost of renting
The country’s warehouses are primarily small-scale go-downs, between 1,076 to 3,200 square feet as compared to the United States where they measure on average 184,693 square feet or the size of three football pitches combined. Worth noting is that available local go-downs serve a small market in East Africa, with manufacturers and retailers owning and running larger warehouses.
A would-be investor will spend an estimated $43,000 (Sh4.3 million) to acquire necessary permit and registration to get utility connections for their warehouse, a figure that is almost twice as much as $24,000 (Sh2.4 million) in Tanzania and $21,000 (Sh2.1 million) in both Uganda and Rwanda. The high prices are attributed to exorbitant land prices that prevail in the country.
According to Knight Frank, a leading real estate consultancy, the rental price per sq. ft. is Sh44.60 in Kenya as opposed to Sh22 in India, lately due to increased demand for warehouses and shortage of supply; prices are projected to further rise.
According to a survey by the Communications Authority of Kenya and figures by the Kenya National Bureau of Statistics, there has been rapid growth of e-commerce. 27% of Kenyan firms sell products online as evidenced by various e-commerce platforms, including Jumia, Kilimall and Masoko. During the time under review, Kenyans spent Sh27 billion as at December 2017 as opposed to Sh7.6 billion in 2014.
Challenges warehouses face
In the same survey, respondents were asked to highlight some challenges they face and results were far reaching. 63 percent of the respondents asserted that inadequacies had created delays for them in being able to meet their customers’ demands. Warehouse holders dealing with pharmaceuticals registered the highest discontent while retailers were least discontent about existing facilities.
Access and location is the biggest challenge, congested highways and poor road infrastructure increase fuel consumption and accidents respectively, and adds more time to journeys and thus increasing shipping costs. Transport and freight cost in East Africa remain the highest in the world with more than 50 percent higher per kilometre compared to Europe and America, according to Trade Mark East Africa. Worth noting is that prices of commodities were influenced at around 75 percent due to poor warehousing in developing countries
The quality of warehouses was also a major challenge; most locally built ones are typically 4 to 5 high against the international standards of 12. Absence of unloading platforms too was noted as this slows downloading time and adds extra labour costs. With attendant high electricity costs in Kenya and East Africa in general, few facilities are built for energy efficiency. This leads to higher operating costs as typically, energy accounts for around 15 percent of warehouse’s operating budget.
21 percent of the respondents cited water and drainage as a major problem to existing warehouses; while water consumption remains low, its consumption when cleaning either the warehouse or freight vehicles, rises significantly. While water harvesting can aid reduce water bills, a big number of warehouses do not tap into this. Poor drainage, especially flooding in and around Nairobi during wet seasons, too harms most operators – the facilities are not flood proof, and waters destroy stock.
Product theft and fraudulent claims for damage to goods and false inventory and shipping counts are some of the security barriers warehouse holders noted. There is need to situate warehouses in secure areas, install CCTVs and video surveillance as well as biometric security systems to secure warehouses and the contents they hold.
While demand for warehouses continues to rise, it is important for upcoming ones to factor in the recommendations and build new ones in standards that can meet the needs of their clients. The benefit is not just to those who rent or use them but is passed onto consumers, for whom prices of commodities will drop to create a cycle of productivity. (