Dollar shortage forces one of Kenya’s largest factories to close

Kenyans are expected to brace for tough times after one of Kenya’s biggest cooking oil makers announced it was halting production due to a shortage of dollars needed to source raw materials.

In a statement dated Monday, June 6, the company, which has its largest manufacturing plant in Mombasa, noted that it had been forced to shut down operations due to severe negative impacts on global supply chains.

The company behind some of the country’s biggest brands also noted that it was facing difficulties in its attempt to access US dollars from reserves to pay for raw materials overseas.

The situation has been aggravated by the ongoing conflict between Ukraine and Russia – a conflict that has caused neighboring countries such as Indonesia to ban food exports.

Cooking oil products on sale.

Case

“Global supply chains have been severely impacted by the ongoing conflict in Ukraine. In addition, some countries like Indonesia have suspended exports of key commodities like palm oil.

“Manufacturers here in Kenya have not been spared the fallout of this unprecedented disruption, following the protracted Covid-19 crisis. Locally, the situation has been compounded by difficulties faced by manufacturers in accessing US dollars used to pay for imports of crucial raw materials,” the statement read in part.

The company, however, assured its workers that the situation was temporary and promised to find an alternative solution.

The development came barely a week after the Central Bank of Kenya (CBK) raised its base rate from 7.0% to 7.5%, influenced by the global supply chain which called for a tightening of monetary policy.

The CBK also noted that there had been a spike in the inflation rate from 5.6% in March to 6.5%, leading to a spike in food prices due to an increase in world prices.

In early May, cooking oil recorded the largest increase in its prices which stood at 41.7% and is expected to increase further.

Wheat flour increased by 24.7%, potatoes by 22.4% while corn flour increased by 14.7%. Papayas and ripe bananas, however, fell by 11.2% and 1.9% respectively.

Fuel prices have also continuously increased.

CBK Governor Patrick Njoroge speaking at the May MPC conference

CBK Governor Patrick Njoroge at the May MPC conference. PHOTO: TWITTER

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