Project for Formulation of Master Plan on Logistics in Northern Economic Corridor

450 Pages·2017·7.01 MB·English

JICA Study Team

Revised Final Report

Project for Formulation of
Master Plan on Logistics in
Northern Economic Corridor

Market and Value Chain Survey - Additional 3
VCs

JICA Study Team
Friday 5 February 2016
JICA Study Team

Revised Final Report

Project for Formulation of
Master Plan on Logistics in
Northern Economic Corridor

Market and Value Chain Survey - Additional 3
VCs

JICA Study Team
file 15-300
registration number Pan-15-110
version 1
Friday 5 February 2016
© PANAFCON Ltd.
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written permission of PANAFCON Ltd.; nor may they be used, without such permission, for any purposes other than that for which they were produced
PANAFCON Ltd.
CONTENTS PAGE

LIST OF ABBREVIATIONS V
PROJECT SUMMARY VIII
1 INTRODUCTION 1
1.1 Background 1
1.2 Objectives of the Survey and Scope of Work 1
1.3 Methodology for the Study 1
1.3.1 Desk Study and Selection of the 3 additional VCs 1
1.3.2 Field Survey on the 3 VCs 2
2 OVERVIEW OF THE 3 ADDITIONAL VALUE CHAINS 3
2.1 Need to reduce Trade Costs 3
2.2 Centrality of Technical Adaptability in Production 4
2.3 The NEC and the 3 Additional VCs 4
2.3.1 Packaging Materials 4
2.3.2 Textiles and Apparel 5
2.3.3 Meat and Meat Products 6
2.4 Kenya’s Economy and Main Exports 6
3 THE TEXTILE AND APPAREL VALUE CHAIN 9
3.1 Textile and Apparel and Kenya’s Industrialisation Ambition 9
3.2 VC Map and Analysis of Survey Findings 9
3.2.1 Cotton Production 9
3.2.2 Ginning Operations 11
3.2.3 Textile/Milling Operations 11
3.2.4 Garment Manufacture 12
3.3 Labour Skills and Costs 12
3.4 Energy Access and Affordability 14
3.5 Need to upgrade and modernise equipment 14
3.6 Transport and Logistics 15
3.7 Institutional Framework 16
3.8 Recent Demand Trends 16
3.9 Global Production and Market Shares 17
3.9.1 Sources of Raw Materials 19
3.9.2 Quality Requirement in the Export Markets 20
3.9.3 Meeting Quality Requirements 20
3.9.3.1 USA/AGOA Market 21
3.9.3.2 COMESA 22
3.9.3.3 EAC 22
3.9.3.4 Potential Future Markets and Market Shares 22
3.10 Summary of Emerging Issues for the Value Chain 23
4 THE PACKAGING PRODUCTS VALUE CHAIN 25
4.1 Advent of Fast Moving Consumer Goods 25
4.2 VC Map and Analysis of Survey Findings 25
4.2.1 Metal Packaging 26
4.2.2 Plastic Packaging 27
4.2.3 Paper and Paperboard packaging 27
4.2.4 Glass Packaging 27
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4.2.5 Packaging Machinery 27
4.3 Input Supply and Production 28
4.4 Transport and Logistics 29
4.5 Location of Production 31
4.6 Nature of Linkages 31
4.7 Global and Regional Context and End Market Analysis 32
4.7.1 Global Production and Market Shares 32
4.7.2 Consumer Packaging 32
4.7.3 Industrial Packaging 34
4.7.4 Kenya’s Volume of Trade 35
4.7.5 Quality Requirement in the Export Markets 36
4.7.5.1 Product Trends Affecting Exports 36
4.7.5.2 Regional EAC Market Quality Requirements 37
4.7.5.3 Other Markets’ Quality Requirements 37
4.7.5.4 Meeting Quality Requirements 38
4.7.5.5 Global Trade in Plastic Packaging 38
4.7.5.6 Kenya Export Performance 39
4.7.5.7 Competition in the Plastic Packaging Market 40
4.8 Competition in the Paper Packaging Market 41
4.8.1 Global Trade 41
4.9 Summary of Emerging Issues in the Value Chain 42
5 MEAT AND MEAT PRODUCTS VALUE CHAIN 44
5.1 Importance of the Sector 44
5.2 VC Map and Analysis of Survey Findings 44
5.2.1 Input Supply 44
5.2.1.1 Cattle and small ruminants 44
5.2.1.2 Poultry 46
5.2.1.3 Pigs 46
5.2.2 Characterisation of the Actors in the Value Chain 46
5.2.2.1 Pastoralists 46
5.2.2.2 Collectors 47
5.2.2.3 Service Providers 47
5.3 Comparative Trends in Meat and Meat products Consumption. 48
5.4 Transport Networks 49
5.5 Domestic Market Wholesalers/Distributors and Retailers 51
5.5.1 Supermarkets and high-end butcheries 51
5.5.2 Butcheries 52
5.6 Linkages with Hides and Skins Value Chain 52
5.7 Traceability and Food Safety 53
5.8 Global and Regional Context and End Market Analysis 53
5.8.1 Global Consumption and Production Meat and Meat Products 53
5.8.1.1 Beef 53
5.8.1.2 Pork 54
5.8.2 Global Export Performance of Meat and Meat Products 55
5.9 Kenya’s Export Performance 56
5.10 Middle Eastern Markets 57
5.11 Sub-Saharan African Markets 58
5.12 Other Markets 59
5.13 Summary of Emerging Issues for the Value Chain 59
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6 CONCLUSION AND RECOMMENDATIONS 61
6.1 Textile and Apparel VC 61
6.1.1 Overview 61
6.1.2 Use AGOA to improve Competitiveness 61
6.1.3 Naivasha as a Textile Production Cluster 61
6.1.4 Investment in New equipment and technology 61
6.1.5 Increasing Value Addition 61
6.2 Packaging Materials VC 62
6.2.1 Overview 62
6.2.2 Encouraging new investment to get better quality of machinery 62
6.2.3 Developing New Markets 62
6.2.4 Review tariffs for imported raw material 62
6.2.5 Provide Skills to address productivity 63
6.3 Meat and Meat Products VC 63
6.3.1 Overview 63
6.3.2 Invest in cattle fattening, combined with stronger vertical linkages 63
6.3.3 Improve sanitary and phytosanitary systems (SPS) 63
6.3.4 Invest in Key infrastructure 63
6.3.5 Strengthen upgrading within the hides, skins and leather part of VC 64
7 REFERENCES 65
8 COLOPHON 68

List of Boxes

Box 1: GVCs and the Domestic Economy 3
Box 2: Country close to adopt genetically modified cotton seed 10
Box 3: Levi Strauss & Co. Global Sourcing & Operating Guidelines 20
Box 4:New tax on imported paper will kill packaging industry 29
Box 5: Rift Valley Railways receives Sh5m duty wagons 30

List of Figures
Figure 1: Kenya’s Textile Value Chain 10
Figure 2: Packaging Value Chain Map 26
Figure 3: Meat and Meat Products Value Chain 45
Figure 4: Standard HS Value Chain, Kenya 52

List of Charts
Chart 1: Share of Total Cost by Type of Manufacturer 13
Chart 2: Comparison of Export Costs among Kenya’s Competitors (US$/20ft. Container) 15
Chart 3: Main Importers of Textile and Garments (US$ ‘000) 19
Chart 4: Quality concerns of Manufacturers 21
Chart 5: Kenya’s export to USA 22
Chart 6: Packaging Raw Material Issues 28
Chart 7: Share of Total Costs by Type of Packaging 30
Chart 8: Idea Relocation of Industry 31
Chart 9: Global Consumer Packaging by Region and by Type 33
Chart 10: Global Consumer Packaging Market, 2014 by End User 34
Chart 11: Global market for industrial packaging products, %age share by value in 2020 35
Chart 12: Global Share of Imports by Plastic Packaging (2014) 38
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Chart 13: Africa’s Share of Plastic Packaging Imports 39
Chart 14: Kenya’s % Destination Shares and Values of Plastic Packaging Materials (2014
values in US$ ‘000) 40
Chart 15: Plastic Packaging Potential Market (Imports in US ‘000) 40
Chart 16: World Share of Imports of Paper Packaging 2014 41
Chart 17: African Share in Imports of Paper Packaging (2014) 42
Chart 18: Destination of Kenya’s Paper Packaging Exports, 2014 42
Chart 19: Trekking and Tucking Costs for Cattle (% Shares) 51
Chart 20: Global Beef Production outlook 54
Chart 21: Global Pork Production outlook 54
Chart 22: Exports of Bovine Meat (US$ ‘000) 55
Chart 23: Exports of Pig and Goat/Sheep Meat (US$ ‘000) 55
Chart 24: Exports of Sausages and Processed Meats (US$ ‘000) 56

List of Tables

Table 1: Kenya, selected key economic indicators 7
Table 2: Kenya: Top 10 exports by Value, Selected Years (US$ ‘000) 8
Table 3: Global Imports of Textile and Apparel 18
Table 4: Estimated Unit Production Costs (US$/tonne) 31
Table 5: Kenya’s Exports of Packaging Materials (US$ ‘000) 35

List of Maps

Map 1: Location of Packaging Processing Manufacturing Facilities 5
Map 2: Geographical Supply Chains 50

List of Annexes

Annex 1: TORs
Annex 2: List of respondents
Annex 3: Survey Questionnaire
Annex 4: World Imports of Textile and Apparel (US$ ‘000)
Annex 5: Kenya’s Exports of Garments to USA (US$ ‘000)
Annex 6: Exports of Meat and Meat Products (US$‘000)
Annex 7: List of Importers
Annex 8: Minutes of Workshop on Draft Report

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LIST OF ABBREVIATIONS
AGOA African Growth Opportunity Act
ASAL Arid and semi-arid lands
BBN Bureau Burundais de Normalisation et Contrôle de la Qualité
BOPP Biaxially Oriented Polypropylene
BRIC Brazil, Russia, India and China
CAGR Compound Annual Growth Rate
CODA Cotton Development Authority
COMESA Common Market for East and Southern Africa
CPO Chief Purchasing Officer
DCs Developing countries
DEAS Draft East African Standards
EAC East African Community
EASC East African Standards Committee
EBA Export Business Accelerator
EPA Economic Partnership Agreement
EPZ Export Processing Zone
EU European Union
FCML Friendship Container Manufacturers Limited
FIBC Flexible intermediate bulk container
FMCG Fast Moving Consumer Goods
FPEAK Fresh Produce Exporters of Kenya
FTA Free Trade Area
GDP Gross Domestic Product
GMO Genetically Modified Organism
GVC Global Value chains

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HACCP Hazard analysis and critical control point
HFO Heavy Fuel Oil
HS Harmonized System
IBC Intermediate Bulk Container
ICT Information and Communication Technology
ISIC International Standard Industrial Classification
ITAD Institute for Textile and Apparel Development
JKIA Jomo Kenyatta international Airport
KEBS Kenya Bureau of Standards
KMC Kenya Meat Commission
KRA Kenya Revenue Authority
KwH Kilo watt hour
MFA Multi-Fibre Arrangement (MFA)
MoIED- Ministry of Industrialization and Enterprise Development
MT Metric Tonne
MVC Market and Value Chain Survey
NBA National Biosafety Authority
NEC the Northern Economic Corridor
NIB National Irrigation Board
OPP Oriented Polypropylene
PE Polyethylene
PEDv Porcine Epidemic Diarrhea Virus
PET Polyethylene Terephthalate
PPM Panafrican Paper Mills
PVC Polyvinyl Chloride
RSB Rwanda Standards Board
RVR Rift Valley Railways

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SADC Southern African Development Community
SMEs Small and Medium Enterprises
SSA Sub Saharan Africa
TORs Terms of Reference
TSB Tanzania Bureau of Standards
UAE United Arab Emirates
UNBS Uganda National Bureau of Standards
USAID United States Agency for International Development
USDA United States Department of Agriculture
VC Value Chain
WTO World Trade Organization

JICA Study Team: Formulation of Master Plan on Logistics in Northern Economic Corridor - Market & Value Chain Survey 5 February 2016
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PROJECT SUMMARY
Project for Formulation of Master Plan on Logistics in Northern
Project:
Economic Corridor
Objectives: Carryout Market and Value Chain Survey
Client: JICA/Nippon Koei Co. Ltd
Consultants: PANAFCON Ltd
Report Title: Revised Final Report - Market Analysis for 3 Additional VCs
Submission Date: February 2016

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