How leaders leverage the energy crisis for future growth? - Logistics

Interview Transcript

Article | How leaders leverage the energy crisis for future growth? – Logistics
1st November 2022 Atheneum Team

Expert Profile


Head of business Operations


Kobo 360


Morris Muhindo serves as a Project logistics specialist in Oil and gas, Energy (dams and powerlines), construction and infrastructure, seasoned in Biopharma logistics, distribution and special cargo management.

Section 1: Energizing Growth During Crisis

1.1. How have increased energy prices impacted your industry?

This energy crisis has affected two main actors of our logistics industry: The consumers and the logistics players. Regarding the logistics players, Uganda is a landlocked country, and we do not have oil.

Our main input is to use diesel for trucks to move cargos from the port into the country, Uganda. As we don’t produce our own oil, we must import fuel. This situation makes the import cost higher and when it goes up it affects the final consumer.

Now the transport rates have gone up by more than 30%, just because of the fuel crisis, which indirectly affects the final consumer, and the cost of goods has also gone up. This has led to inflation in our industry because now the logistic companies cannot make margins. Additionally, the customers cannot match the prices that you need as a transporter to break even because they cannot sell the commodities to the final consumer. In the end, they must pack their trucks because it can’t make sense for them to move a container at a loss.

1.2. Has it changed the way you manage your energy?

It now has helped us to become open. We are looking at electric cars in the long term. In terms of budgeting, now we look at having equipment that is less dependent on diesel because initially we were highly dependent on it, and that was a requirement. But now we are looking more at electric cars, and we are also using trains. This option allows us to avoid congestion and reduces the cost of maintaining fleets for long distances. Besides, once you use the train you are not limited by traffic, you don’t stop.

1.3. What practices have you applied to maintain business performance during the energy crisis?

Now we have not yet engaged in any contractual agreements, because what we have in place is insurance to protect us against fuel fluctuations. This way, for example, if I’ve made my contract with my customer at a certain rate, and there’s a price fluctuation because of the diesel, then the insurance company will cover me to reach the agreed amount.

1.4. What immediate changes did you implement to your operations?

We hired a company to supply us fuel trackers, because now you can never know how much oil you have in your diesel tank per truck. This is a recent technology that we have adopted, a tech company installs trackers that can also detect and confirm where your vehicle is, and how much diesel you have in your fuel tank, so that the drivers will not siphon out the diesel and sell it along the road, because now during a crisis the demand is high, and the drivers attempted to sell the fuel to make extra money.

So, once we have digital trackers into the vehicles installed and linked to the tank, we know from the dashboard if the diesel has been tampered with, or if there is someone attempting to tamper with the diesel tank, it is an alert system. So, in this way, we reduced our losses of diesel.

1.5. Where do you see opportunity in leveraging the current energy crisis into a long-term benefit?

Now Uganda is in production of its own oil, but the EU parliament passed a resolution that said the country and Tanzania should stop oil and gas development projects in the East African region. This is going to affect us, but now with the global crisis in oil prices, we are looking at having electric vehicles rather than depending on diesel.

So, in the long term, we need to start looking in that direction because in the next 20 years, diesel vehicles will be out of the market.

We are looking at having heavy haulage vehicles that are more electric than diesel. And once we have all this oil, it may end up not being effective for operations. So as a businessperson, I think we need to keep a long-term perspective and begin adopting the technology of electric cars. But now, mainly small cars that are being manufactured are tending towards electric, we need a push towards the heavy-duty trucks that can be powered by electric energy.

Section 2: Rethinking Future Energy Strategy

2.1. What are the drivers and challenges in rethinking your future energy strategy?

For now, I would look at our country giving priority to the drilling of the natural resources that we have, which is oil and gas, and which we have not exploited, and have been under a dormant phase since exploration.

We have a lot of oil; we need to build up refineries and oil pipelines with pump stations that stretch about 1,200 kilometers to port, but for Uganda, this oil project can take longer than 60 years. However, with the changing dynamics and the global trends in the world, that are making us move away from diesel to electric cars, this heavy investment in oil may be a loss to the country.

So, in my opinion we need to be innovative and look at the future, and so at green energy instead of using diesel, because now the issues of climate change, global warming, are coming up. So, we need to begin looking at green and clean energy.

2.2. Where do you see opportunities to grow ROI & capitalize from Decarbonization, Energy Diversification and Energy Transition?

Because of global warming, we may have to look at consolidation. We may have to have transporters come up with a system, for instance, Uber, so that we don’t have to have many people along the road with so many trucks. But for instance, if we can take an opportunity of using a batch over the water bodies that we have, and then we have logistics hubs, then we can reduce many conditions along the routes, and then probably we can use the railway system and we take off the heavy trucks because the heavy trucks are the ones that destroy the roads because of carrying heavy goods, and they pollute the environment.

We could have a train that would ferry the goods from Mombasa Port to Uganda, then we could use a batch over the Lake Victoria, and we have this hub which is only for shunting. That would be something that I would really look at. But because right now the change that we have is that one person owns one truck, another person owns five, another one 100, another one, 80, so all that causes conditions along the road. Being that we use diesel, we’re also polluting the environment.

We need to investigate a system where we can channel and head back to the train, which we don’t have now. We just have an old rail system. I think we’re in plans of having the standard gauge, probably with time, if that can be done from Mombasa Port to Uganda, that will be huge, and would serve for the environment.

2.2.1. What role do you attribute to diversification of energy types?

I think it is solar because now we have particularly clear weather. All through the year we have no winter, and the solar system has proved to work best in the rural areas, and it is affordable. So, it is easy to have the population shift to solar system as opposed to the wind and nuclear because that would require a massive investment in Uganda, which may not happen.

Solar would be something achievable for the local population, they can easily afford it because now the population is picking up with the solar energy in their homes for local television and everything. So, I believe in the future it is something that can be affordable. It’s a one-off installation, and you don’t need to keep on subscribing for renewal or anything. So, you pay your costs, and once you’re done with your payment for your solar panels, the solar panel is yours, no one will take it away for some time. So, it is something that is affordable compared to hydroelectric power and nuclear, which you must keep subscribing to and buying units to access power.

2.3. How do you expect the energy value chain to transform along with the decarbonization strategy?

I think in this case we need to look at the end users most because if we can look at the common user’s items, for the end user it would be the bulbs because they need the light. So, if you can have the accessories that last longer and are energy efficient, that should be the way to go. As an example, the producing companies should become so innovative that they can make a bulb that lasts maybe 10 years, and that consumes less energy. Also, they should produce devices, laptops as an example, that consume less energy because if you’re using a laptop and it consumes high voltage, then you’re not saving. So, we need to look at having manufacturing items that are less energy consuming, and that will be attractive to the local population too. At the end, the cost and the global warming process will be lower and slower in the long term.