One on One interview with Malcolm Steyn General Manager for Oil & Gas at Freight Forwarders Kenya Group
How has the logistics industry changed the discovery of oil in Kenya and Uganda as well as Natural Gas in Tanzania?
The regional logistics landscape has undergone significant changes due to the exceptional requirements of the exploration companies. Local organizations have had to invest resources in order to comply with stringent health and safety requirements as well as emergency delivery schedules.
How have local players adapted to the growing opportunities in East Africa?
Despite intense competition from multinational forwarders, numerous local entities have been able to enhance their operational capabilities by managing to invest substantial resources to develop equipment and infrastructure as well as to train and develop human capital.
Apart from oil and gas what opportunities are arising in the entire mining sector?
With regard to mining, other east African countries other than Kenya already have in place the necessary investment and mining laws that can or have attracted multinationals. Tanzania is the 4th largest producer of gold in Africa, and have had large scale mining operations for over a decade. Further afield, the potential of the DRC cannot be gainsaid, if only the security situation can be addressed in the eastern part of the country.
Above all factors, and especially in light of the current international commodity prices, infrastructure such as electricity generation, ports, rail and road infrastructure needs to be upgraded by the governments in order to reduce production and transport costs. The World Bank estimates that the demand for electricity in Sub Saharan Africa could reach over 23,000 MW by 2020 (http://www.worldbank.org/en/news/feature/2015/02/09/open-talks-between-mining-firms-and-governments-key-to-powering-africa).
Kenya’s track record in the mining sector is thin for the moment, with Base Titanium being the only large-scale operation. There are a few junior and mid sized companies operating exploration programs, mainly in western Kenya.
Legislatively what efforts have you seen to give local players an edge over international firms?
Regrettably, there has been negligible support in Kenya and Tanzania to enact legislation that promotes and assist in the development of local logistics organisations. The opposite is true in Uganda where non-Ugandan logistics firms are not allowed to participate in the Oil & Gas sector.The lack of enabling legislation has placed further constraints on logistics companies’ abilities to operate efficiently in the region.
On the infrastructure side what challenges do logistics continue to face and what improvements have you witnessed so far?
There are numerous infrastructure challenges that adversely affect logistics operations in the region. Chief among these are road conditions in remote areas and security concerns. On a positive note, documentation procedures have improved due to the introduction of new technologies thus decreasing clearance time at the Port and at the borders.
How easy has it been for local firms accessed capital for expansion and to finance projects?
The financial sector in East Africa is relatively well developed and conducive for most businesses to access capital for expansion provided a detailed business plan is prepared that mitigates all the inherent risk prevalent in the Oil & Gas sector.
How has the recent oil slump affected oil exploration from your perspective and what are you doing to remain profitable?
The recent volatility in the global oil markets has adversely affected the scale of exploration activities in Kenya and Uganda (where legislation has also hampered activity). Therefore, only organizations that have a diversified range of service are able to survive any substantial turnaround.
Where do you see yourselves in the mid-term as well as in the long term?
The Freight Forwarders Group continues to invest considerable resources in developing our internal infrastructure, equipment and our people. We are endowed with one of the largest asset bases in the region and continue to expand our regional activities in the Oil & Gas and Mining sectors.