Manufacturers raise prices by 9pc amid rising costs
Associated Vehicle Assemblers Ltd plant in Mitirini, Mombasa. Local assemblers of motor vehicles raised prices by an average of 7.4 percent. FILE PHOTO | NMG
Manufacturers raised the prices of their goods by an average of 9.1 percent in the year to December 2023 as they passed on to consumers the higher cost of doing business.
Data from the Kenya National Bureau of Statistics (KNBS) shows that during the period, manufacturers increased the cost of processed foods such as bread, flour and rice by an average of 2.01 percent and drinks by 8.39 percent.
Companies that make tobacco products such as cigarettes raised their prices by 9.52 percent even as the sector continues to be hit by frequent increases in excise duty, while chemical makers increased prices by 30.94 percent, the highest increase in the period.
Local assemblers of motor vehicles also raised prices by an average of 7.4 percent while electrical equipment manufacturers made a 15.6 percent price increase.
However, only three categories of manufacturers—those who make textiles, apparel and paper—decreased their prices by 0.98 percent, 6.4 percent and 0.57 percent.
“Over the last year, the highest price increase was in chemical and chemical products at 30.94 percent while the highest price decrease was in the manufacture of wearing apparel at 6.40 percent,” said the KNBS.
Manufacturers have been struggling under a growing burden of taxes even as prices of inputs—most of which are imported—continue to rise amid the rapid depreciation of the Kenya shilling against the US dollar.
The increase in taxes came as the Kenya Association of Manufacturers unsuccessfully lobbied against their introduction through the Finance Act 2023, which raised the cost of doing business.
The government last April raised the cost of electricity by up to 63 percent, dealing a blow to heavy industries where the cost of power accounts for as much as 30 percent of their running expenses.
This, coupled with muted consumer demand due to inflation, has curtailed the performance of manufacturing, which directly supports hundreds of thousands of jobs.
In the first half of 2023, for instance, the industrial sector recorded lower growth of 2.5 percent in the first quarter and 1.8 percent in the second quarter compared to 4.4 percent and 4.2 percent, respectively, in similar quarters in 2022.
“Activities in the manufacturing sector, which accounts for nearly half of the industrial sector output, were hampered by a decline in the manufacture of both food (particularly sugar production) and nonfood products,” said the Treasury.
Despite these challenges, the Treasury has tipped the sector to record improved growth this year, supported by improved availability of raw materials due to recovery in agricultural production and a decline in global commodity prices.
