Learn about exporting from the US to East African countries
Of the 11 fastest - growing economies from 2010 to 2020, 10 are predicted to be in Africa. Of those 11, seven are in Eastern Africa: Kenya, Uganda, Tanzania, Malawi, Zambia, Zimbabwe, and Madagascar. East Africa includes many of the “last frontier” markets with high growth potential market on the planet. Africa’s economy is taking its new root through East Africa, with Kenya and Ethiopia leading the way following by Tanzania and Uganda, which together comprise over 300 million people.
In Ernst and Young’s Africa Attractiveness Survey for 2014, 5 of the 6 emerging hotspots (Kenya, Mozambique, Uganda, Tanzania and Zambia) for investment are in East Africa. This blog post will go into detail about the markets of East Africa and how US exporters and importers can benefit by shipping to East African markets or shipping from East Africa to the US.
Defining East Africa, the EAC, and Frontier Markets:
According to the UN Definition, East Africa consists of the countries of: Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Mayotte, Mozambique, Réunion, Rwanda, Seychelles, Somalia, Uganda, United Republic of Tanzania, Zambia, and Zimbabwe. Details on the biggest countries in East Africa can be found here.
The East African Community (EAC) is an intergovernmental organization comprising of five countries: Burundi, Kenya, Rwanda, Tanzania and Uganda with its headquarters in Arusha, Tanzania. The EAC’s Mission is to widen and deepen Economic, Political, Social and Culture integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and investments.
The EAC Customs Union launched in 2005 is intended to create: a Common External Tariff (CET) on imports from third countries, duty-free trade between the member states; and common customs procedures.
The EAC Common Market launched in 2010 is focused on allowing for free movement of labor, capital, goods and services within the EAC.
The East Africa Monetary Union is intended to create a regional currency and is still under negotiations as of September 2014.
A Frontier Market, or Pre-Emerging Market is a country that is not a developed market and generally a small, illiquid (stock market) and risky market to invest in. The difference between an Emerging and Frontier market can be found here. 3 of the top 5 Frontier Markets of Africa are in East Africa – Kenya, Ethiopia and Tanzania.
Infrastructure, Transport and Economic Development
We have listed some of the big development projects going on throughout East Africa below:
Mombasa – Kigali Railway Project:
This 2,935 km railway project goes from Mombasa-Malaba-Kampala-Kigali and has already commenced as of November 2013. This is part of Kenya’s Vision 2030 plan. The presidents of Kenya, Uganda and Rwanda are responsible for development and financing of the portion of the railway under each of their territory. The railway line serves Kenya, Uganda, Rwanda, Burundi and the Democratic Republic of Congo carrying their imports through the Port of Mombasa.
The leaders of the three countries also agreed to upgrade the Tororo-Gulu-Nimule line to Standard Gauge Railway (SGR) and extend the railway line from Kigali to Bujumbura by March 2018.
Lamu port Southern Sudan-Ethiopia Transport LAPSSET, Kenya: the LAPSSET project is a 20 year, $25 billion port and corridor project which aims to exponentially increase regional trade and import and export potential for Kenya, South Sudan and Ethiopia. When complete, the port will be three times the size of Mombasa port. It includes a 32 berth deep-water port, 1,300 km of crude oil pipelines, and over 1,700 km of new highways and nearly 1,700 km of new airport, new railway and an oil refinery. In August of this year, a Chinese firm signed a $479.9 million deal to construct three berths at Lamu.
Lamu-Lokichoggio Railway and Nairobi-Moyale Railway:
Kenya is planning to construct a 1,400-km Lamu-Lokichoggio railway and the 700-kmNairobi-Moyale rail, which will connect Kenya to Juba in South Sudan as part of the Lamu Port-South Sudan- Ethiopia transport corridor.
Kenya Electricity Generating Company Limited (KenGen): a $5 billion project to increase power capacity by 3,000 megawatts by 2018.
Infrastructure Development: Mozambique and Tanzania are seeing tremendous growth in infrastructure development, including schools, hospitals, retail buildings, medical equipment, building materials.
Agriculture: Top exports from the USA to the region include fruits, vegetables, grains, feed, rice, wheat, oilseeds, poultry and eggs.
Long an inefficient industry in the region, agriculture is advancing as African farmers improve specialized farming practices which improve crop yields leading to increased exports from the region as well. Coffee and tea are big export commodities, but so are many fruits and vegetables such as mangoes, pineapples, bananas, artichokes and avocados.
Tourism: Kenya and Tanzania are the main destinations, but Uganda and Rwanda are also seeing increases as well. The implications of increased tourism in the region is investment in infrastructure such as airports, roads, electricity, telecommunications, commercial, industrial and retail real estate development, among others.
With the development of improved railway projects, East Africa will see much lower transport and freight cost (some say up to 75% lower) once completed.
Logistics into East Africa – Major Ports and Shipping Routes
The supply chain and infrastructure needed to improve freight costs and improve delivery times is tremendous. Major seaports in East Africa include: Mombasa, Dar Es Salam, Beira, and Djibouti. As a 3PL, American Export Lines (AEL) has been shipping to these countries for nearly 40 years. AEL has developed a reliable network of strategic partners and agents through East Africa for intermodal, warehousing, distributing and final-mile delivery services. These services include temperature controlled units, low loaders, short-haul and long-haul trucking services.
AEL’s East Africa Freight Forwarding Solutions:
• Ocean Freight: from any US point of origin to any East African port. The main ports of transit are Mombasa, Dar Es Salaam, Nacala, Beira, Maputo, Quelimane, Nacala, and Pemba.
• Air Freight: from US to East African airports: export of time-sensitive cargo is increasing from the US to this region. Air Charter services are also increasing as oversized and high volume cargo (such as oil and gas equipment and parts) that is time-sensitive grows to the region.
• Intermodal Services from US point of origin to any Inland Container Depot (ICD) in East Africa.
• Project Cargo and Logistics: large scale infrastructure deals in these markets has lead to an increase in project logistics including oil and gas drilling and discovery equipment, jack-up rigs, power line structures, excavators, heavy machinery, substations and transformers as well as other over-dimensional equipment.
• Dangerous Goods Shipping: AEL is certified to handle DGR regulated cargo for domestic and international transport. We are 49CFR, IMDG, and ICAO certified for road, ocean and air transport of hazardous materials.
• Cargo Insurance: due to the risks in shipping to these markets, Cargo Insurance is HIGHLY recommended. AEL offers all-risk and total-loss cargo insurance.
Delmas (a CMA CGM subsidiary) is the top carrier for shipping to East African ports and inland cities. AEL has a very strong relationship with Delmas and the CMA CGM group and can offer rates to many ICD’s. AEL also has relationships with Maersk, PIL, Mitsui OSK, MSC and Simatech among others. Even the CEO of Shipping Giant Maersk says East Africa is ripe for investment.
AEL offers full multimodal services carrying your ocean containers from point of origin to final delivery in landlocked African countries. You do not have to pay demurrage nor deposit at port of discharge when moving containers from port to an ICD. We offer a through bill of lading (B/L) to final inland port of discharge. Inland Cities we can ship a through B/L to include: Blantyre, Bujumbura, Boma, Bukavu, Harare, Juba, Kampala, Kigali, Lilongwe, Lubumbashi, Lusaka, Massawa and Nairobi. These services are on rail, road or rail + road.
Oil and Gas Discoveries in East Africa
Oil discoveries in Juba, South Sudan, Uganda and Kenya as well as gas deposits found off the coasts of Tanzania and Mozambique have turned East Africa into a focal point for exploration and investment. The region is abundant in many commodities including oil, gas, gold and niobium as well as rare earth metals. Some of the offshore oil is currently being explored by China’s state owned CNOOC. East Africa’s energy boom has bolstered investment in the region led by European companies including: Tullow Oil, Royal Dutch Shell, Total, Cove Energy, Aggreko, BG Group, Galp Energia and ENI.
The Exciting and Challenging Road Ahead
While East Africa has no comprehensive infrastructure strategies, there are certain governments that are teaming up with trade association the UN, USAID and private sector companies forging ahead with development of large scale projects. East Africa has the potential to offer incredible returns for investors, importers, and exporters if coordination among governments, private sector, trade associations and donors is improved.
Contact us today at (800) 874-4748 or request a quote.