Prolonged JKIA freighter crisis to hurt the Kenyan economy, says CBK survey

“Ensure availability of cargo freight services as exporters, especially of perishables, are facing challenges of limited freight capacity, despite high demand,” according to the survey dated November 2024.

Agriculture is key to Kenya’s economy, contributing 33 percent of the gross domestic product (GDP) and another 27 percent of GDP indirectly through linkages with other sectors, according to the United Nations Food and Agriculture Organisation (FAO).

The sector also employs more than 40 percent of the total population and over 70 percent of the country’s rural people.

Kenya’s fresh produce exporters are facing a backlog of cargo at the Jomo Kenyatta International Airport after several international airlines opted to shrink or completely withdraw their services in favour of global routes with relatively better returns.

Last November the Shippers Council of Eastern Africa (SCEA) estimated the backlog of fresh produce at JKIA to be between 300 tonnes to 800 tonnes, with the possibility of the situation getting worse due to the high season.

Airflo BV, a Dutch fresh produce handling and transportation company in November was forced to direct its Kenyan customers to reduce delivery as a result of the ongoing freighter crisis at JKIA that is leading to accumulation of cargo.

The company said flight cancellations and delays at the Nairobi-based airport significantly impacted its operations during the start of the 2024/2025 high season.

"Over the past weeks, our team in Kenya has informed you (customers) about the significant flight cancellations and delays impacting the start of the 24-25 high season," the company says in a public notice to clients dated November 1.

"These disruptions have removed 300 tonnes from our planned airfreight capacity, and despite our efforts to arrange charter flights to recover the situation, there is simply no capacity available due to demand levels ex Asia."

The CBK survey assessed the chief executives’ optimism in the growth prospects for their companies, sectors, the Kenyan and global economies over the next 12 months.

Read: Cargo airlines leave Kenya fresh produce exporters stranded

The respondents reported moderated optimism in growth prospects for Kenya for the next 12 months largely on account of muted consumer demand, high cost of doing business and tough taxation regime.

However, a stable shilling, lower inflation, good weather prospects and expected decline in lending interest rates are expected to support growth.

Policy easing

“Higher growth prospects for companies driven by company specific strategies and expectations of enhanced access to financing due to the effects of monetary policy easing. Sectoral growth prospects are lower, largely on account of sector specific challenges,” says the survey.

More firms reported higher optimism for global growth prospects in the next 12 months, supported by lower global inflation and interest rates cuts in major economies.

However, concerns around increased geopolitical tensions, expected change in policy by the new US administration, and an uptick in global food prices remain.

Kenya's economy grew by 5.6 percent in 2023 from 4.9 percent in 2022.

However, according to the survey the balance of opinion shows expectations of lower business activity in the first quarter(January-March) of 2025 compared to the fourth quarter (October-December) of this year (2024 ) largely on account of key factors including cost of doing business, taxation and reduced consumer demand that are key domestic factors expected to constrain firms’ growth in the next 12 months.

The firms are however expected to mitigate the constraining factors by managing costs and risks, diversifying operations and increasing sales and marketing of their goods and services.

The survey which was conducted between November 11 and November 22, 2024 inquired from CEOs their levels of confidence/optimism in the growth prospects for their companies and sectors, as well as the growth prospects for the Kenyan and global economies over the next 12 months.