Middle East crisis should push Kenya to firm up supply chain

What began with the October 7, 2023 attacks, where Hamas-led militias killed around 1,200 people in Israel and took nearly 250 others hostage, has since escalated into a complex regional conflict involving Gaza, Iran, Israel, and Yemen’s Houthi rebels.

The fallout has not been limited to the battlegrounds. It has spilled over into global commerce, disrupting critical trade arteries that connect continents and economies.

East Africa, which relies heavily on global maritime trade for its essential imports, is now grappling with the ripple effects of this crisis.

The Red Sea, a key shipping corridor for cargo destined for ports like Mombasa and Dar es Salaam, has become increasingly perilous.

Attacks by the Houthi militia on commercial vessels have forced global shipping lines to divert their fleets around the Cape of Good Hope.

This rerouting adds significant time, sometimes weeks, to delivery schedules and has driven up shipping costs by more than double in many cases.

Delays are now commonplace, with cargo arriving up to 15 days late, leading to congestion at regional ports and uncertainty for importers and consumers alike.

At the same time, the cost of securing maritime shipments has soared. Shipping and marine insurance premiums have increased as risk levels climb. These rising costs are directly affecting the landed prices of vital goods such as fuel, fertilisers, electronics, and other industrial and consumer products.

Fuel prices, in particular, have become volatile. Approximately one-fifth of the world’s daily oil consumption --some 19 million barrels— moves through Middle Eastern chokepoints.

Any threat to this flow triggers global price spikes, which trickle down to East African economies in the form of rising pump prices, higher manufacturing costs, and increased transport expenses. The net result is inflationary pressure that burdens both producers and consumers.

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Air freight has not been spared either. Although most trade between the Middle East and East Africa is conducted by sea, a considerable volume of high-value, time-sensitive, or perishable goods travels by air.

These include pharmaceutical supplies, medical equipment, luxury electronics, important documents, and perishable items like fresh flowers. The escalating conflict has led to several airlines, including Ethiopian Airlines, suspending flights to conflict zones such as Tel Aviv.

This disruption in air travel has constrained cargo movement, leading to losses for businesses that rely on tight delivery schedules and cold chain logistics.

For manufacturers, the impact of these disruptions has been both immediate and far-reaching. With that corridor now increasingly unstable, the cost and duration of transporting raw materials have surged.

Additionally, rising fuel prices have made local manufacturing and distribution significantly more expensive. These compounding pressures are felt not just at the factory gates but also by households across East Africa.

Yet, even in the face of these headwinds, there is an opportunity to chart a more resilient path forward. Local manufacturers should re-evaluate and reinforce their supply chain by exploring alternative sourcing strategies, building storage capacity, and investing in technologies that can help in anticipating and managing external shocks.

This can be aided by forging regional partnerships that can reduce exposure to distant crises and anchor supply reliability closer home.
But the private sector cannot do this alone.

Governments and regional bodies like the East African Community must step in to strengthen regional trade infrastructure.

More integrated customs systems, improved transport corridors, and coordinated logistics frameworks will be key to minimising the impact of global crises on local industries and consumers.

The Middle East serves as a stark reminder of the vulnerabilities in East African systems and the urgent need for proactive strategies.

The writer is the Pwani Oil Commercial Director