Dollar Shortage Forces One of Kenya's Largest Factories to Close

  • Plums of smoke emanating from a factory.
    Plums of smoke emanating from a factory.
    File
  • Kenyans should prepare for tough times after one of Kenya's largest manufacturers of cooking oil announced that it was halting its production due to a shortage of dollars needed to procure raw materials. 

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

    The company behind some of the country's top brands also noted that it faced challenges in its attempt to access US dollars from the reserves to pay for raw materials abroad.

    The situation has been worsened by the ongoing conflict between Ukraine and Russia - one that has made neighbouring countries such as Indonesia ban exports of food commodities.

    Cooking oil products on sale
    Cooking oil products on sale.
    File

    "The global supply chains have been severely impacted by the ongoing conflict in Ukraine. In addition, some countries like Indonesia have suspended exports of crucial commodities like palm oil.

    "Manufacturers here in Kenya have not been spared the aftershocks of this unprecedented disruption, coming in the wake of the prolonged Covid-19 crisis. Locally, the situation has been compounded by challenges faced by manufacturers in accessing US dollars used in paying for imports of crucial raw materials," read the statement 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) increased its base lending rate from 7.0 per cent to 7.5 per cent influenced by the global supply chain which called for tightening of the monetary policy.

    CBK also noted that there was a spike in the inflation rate from 5.6 per cent in March to 6.5 per cent leading to a spike in food prices due to an increase in global prices.

    At the beginning of May, cooking oil denoted the sharpest increase in its prices which stood at 41.7 per cent and is expected to further shoot up.

    Wheat flour had a 24.7 percent increment, potatoes showed a 22.4 percent while maize flour rose by 14.7 percent. Paw paws and ripe bananas however dropped by 11.2 percent and 1.9 percent respectively. 

    Fuel prices have also continually been on the rise.

    CBK Governor Patrick Njoroge speaking at the MPC May Conference
    CBK Governor Patrick Njoroge during the May MPC Conference. PHOTO: TWITTER