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Pooling resources, State support key to unlocking logistics industry growth
By prioritising regulatory consistency, export promotion, digital transformation, and strategic partnerships, Kenya can unlock new opportunities for growth, ensuring that future logistics businesses succeed where others have struggled.
Kenya’s logistics sector plays a critical role in driving trade, economic growth, and regional integration.
As the gateway to East Africa, Kenya has an extensive transport and logistics network that supports the movement of goods across borders, connecting businesses to global markets.
However, while the industry has seen remarkable progress, challenges such as regulatory uncertainty, infrastructure gaps, and an overreliance on imports continue to hinder its full potential.
One of the most transformative forces in Kenya’s logistics landscape has been consolidation—a model that allows multiple small traders to pool shipments, lower costs, and improve efficiency.
This approach has played a significant role in making international trade accessible to small and medium-sized enterprises, positioning Kenya as a key logistics hub.
One of the most notable pioneers of consolidation in Kenya was African Salihiya, a company that revolutionised the logistics industry in the late 1990s. Founded by entrepreneurs from Mandera County, Salihiya introduced a streamlined approach to global trade, handling everything from product sourcing to customs clearance and delivery.
By choosing Eldoret International Airport as a key hub, the company transformed the airport into a thriving logistics hub, generating more than Sh6.3 billion in import taxes within just three years— a surge attributed largely to Salihiya’s operations.
The following year, projections indicated an additional Sh2.7 billion in revenue as more cargo flights resumed under Salihiya’s initiative.
This influx of trade not only swelled government tax coffers but also justified new investments in infrastructure, including plans to extend Eldoret’s runway to accommodate larger cargo planes.
However, despite its early success, Salihiya faced a series of challenges that ultimately led to its fragmentation. The lack of formal regulations before 2019 meant consolidation businesses operated in a legal grey area, making them vulnerable to arbitrary customs decisions and shifting government policies.
Additionally, internal conflicts, resistance to modernisation, and the absence of structured management led to inefficiencies that weakened the company’s dominance.
The decline of Salihiya serves as a crucial lesson for the industry— consolidation is powerful, but without proper regulation and strategic foresight, even the strongest logistics businesses can falter.
For Kenya’s logistics industry to thrive in an increasingly competitive East African market, government intervention is crucial. Strategic policies, infrastructure investments, and regulatory consistency are needed to ensure that consolidation continues to benefit businesses while avoiding the pitfalls of unregulated growth.
Kenya’s logistics sector stands at a crucial turning point. The rise and fragmentation of Salihiya highlight both the potential and the risks of consolidation. Moving forward, government policies, infrastructure development, and private-sector innovation will determine whether Kenya cements its place as a leading logistics hub in Africa.
By prioritising regulatory consistency, export promotion, digital transformation, and strategic partnerships, Kenya can unlock new opportunities for growth, ensuring that future logistics businesses succeed where others have struggled.
The road ahead is clear—it is now up to policymakers, industry players, and investors to work together to drive the sector forward.
1. Regulatory stability and fair enforcement
The Finance Act 2019 introduced formal regulations for logistics consolidators, but enforcement remains inconsistent. Sudden customs policy changes and bureaucratic red tape create uncertainty for businesses, making long-term planning difficult.
The government must ensure that regulations are clear, predictable, and aligned with industry realities.
2. Encouraging exports to balance trade
A major weakness in Kenya’s logistics sector is the imbalance between imports and exports. Most consolidators focus on bringing goods into the country, with little attention given to developing outbound trade.
The government should introduce tax incentives, grants, and simplified export procedures to encourage businesses to engage in international trade. A strong export logistics network will help reduce Kenya’s trade deficit and support local industries.
3. Investing in infrastructure and digitalisation
Logistics businesses depend on efficient transport infrastructure, yet challenges such as poor road networks, congested ports, and delays in cargo handling remain widespread.
While projects like the Standard Gauge Railway (SGR) and the expansion of Lamu Port are steps in the right direction, more investments are needed.
Furthermore, the government should support the digital transformation of logistics. Smart tracking, automation, and e-commerce logistics solutions can improve efficiency and make Kenyan logistics firms more competitive in global markets.
The private sector has proven its ability to drive innovation in logistics. The government should collaborate with logistics firms through Public-Private Partnerships (PPPs) to develop specialised trade zones, modern cargo terminals, and training programs for logistics professionals.
This collaboration can help Kenya handle higher trade volumes and attract foreign investment in the logistics sector.
5. Leveraging regional trade agreements
Kenya is a member of the East African Community (EAC) and the African Continental Free Trade Area (AfCFTA)—agreements that provide access to expanded markets.
The government should actively engage in these trade blocs to reduce barriers, harmonise regulations, and facilitate smoother cross-border logistics.
Expanding regional trade will make consolidation even more valuable, enabling businesses to access larger markets with lower costs.
6. Strengthening trade and industry associations
Stronger trade and industry associations can play a crucial role in shaping Kenya’s logistics industry by providing collective bargaining power and fostering collaboration between traders and government agencies. These associations help streamline regulatory processes, advocate for fair policies, and ensure compliance with international trade standards.
For instance, the Kenya Association of International Cargo Consolidators (KAICC) is a key player in improving coordination between logistics firms and government bodies.
By uniting industry stakeholders, such associations can enhance efficiency, reduce operational bottlenecks, and create a more predictable business environment.
Strengthening such collaborations will be vital in ensuring that logistics firms in Kenya remain competitive and resilient in a rapidly evolving global market.
Saeed Sidoman Sheikh Abdirahman is a Logistics Expert | PhD Cont. | LLB Law Cont.
