Home-grown activity: Local firms take on a bigger role in the logistics segment

Kuwait has a growing segment of private sector firms providing trade and logistics services. While many of these firms initially gained a foothold by serving US military personnel in the country, there are signs that the sector is diversifying away from public sector contracts and increasingly catering to businesses and households. Well-known global players such as FedEx, DHL and UPS are active in the local market, but there are also several home-grown logistics businesses that have established themselves as regional leaders.

LOOKING LOCALLY: Agility’s Global Integrated Logistics arm is one of the biggest players. It was set up as a state-owned entity called Public Warehousing Company in 1979 but was privatised in 1997. The group rebranded its global operations in 2004 and has grown rapidly since by buying several regional shipping and logistics firms to expand its reach. The company employs more than 20,000 staff in 500 offices across over 100 countries globally. The publicly traded entity posted revenues of over $4.85bn in 2014. Agility’s annual reports for 2014 highlight that the company facilitated 2.14m shipments, some 372,700 tonnes of air freight and 513,500 twenty-foot equivalent units of ocean freight for more than 60,500 customers.

While the global economic downturn of recent years has hit the firm’s revenues, a focus on meeting the needs of emerging markets in India and Africa has helped it to maintain its expansion. Agility reported that it will continue to invest in warehousing infrastructure globally. In Ghana, for example, the group is constructing a distribution park on a 16-ha site at Accra’s Tema Port Free Trade Zone. According to Arabian Business, the first phase of the park, which will provide more than 100,000 sq metres of warehouse space, will be operational in 2015. The development is part of Agility’s broader strategy of developing distribution parks across its core emerging markets.

As it focuses on expanding its global reach, Agility has reduced its distribution network within Kuwait. However, another local firm, Posta Plus, has stepped in to meet delivery needs. The group was established in 2005 with a start-up capital of KD6m ($20.67m) and has rapidly expanded. It reached a major transition point in 2011 when it acquired key accounts with a number of major banking and telecoms clients in Kuwait, including NBK, Gulf Bank, Zain, Wataniya and VIVA. The group is one of the few players focusing on the domestic market, in addition to its operations in the UAE, Bahrain, the UK, the US and China.

A GROWING PORTFOLIO: Aramex and Kpost round off the logistics segment, though Aramex is gradually also shifting its focus away from domestic shipments to a greater regional and international role. Building on prior acquisitions of One World Courier and In-Time Couriers in Kenya, and Berco Express in South Africa, Aramex has recently added South Africa’s PostNet to its growing portfolio. The $16.5m deal made South Africa’s largest privately owned counter network part of Aramex, adding to the company’s presence in the southern African market.

International players have generally focused on supporting US military contracts, which used to account for more than 50% of their revenues within Kuwait. The withdrawal of US troops from Iraq has reduced this revenue stream. Other institutional challenges have also affected the local logistics market. Complex Customs processes, for example, require a local understanding of the systems and practices required to provide logistics services for the domestic market. Companies like Posta Plus are banking on being well positioned to meet these requirements.

GOING FORWARD: The growth of local companies within the logistics sector points to widening industry potential in the country. “There is a lot of opportunity in Kuwait, specifically in the cash segment and online shopping, which can greatly boost the economy,” Amr Tantawy, country manager for DHL, told OBG. While it is likely that competition will lead to tighter margins going forward, new business lines and trends should continue providing support for the industry.