- Official data shows that landed cost of basic food items like wheat, cooking gas, as well as key materials used in farming and construction, have shot up by as much as 67 percent in the past year.
- An analysis of commodities shipped into the country last year based on data collated by the Kenya National Bureau of Statistics (KNBS) shows the cost of importing cooking oil rose the highest, followed by fertiliser, iron and steel.
- The emerging global geopolitical and persistent supply chain concerns have exposed Kenya’s soft underbelly as a net importer of raw materials for manufacturing basic household items.
Kenyan households and businesses are feeling the pinch of global supply constraints and weakening shilling that has increased the cost of importing essential goods, further squeezing earnings.
Official data shows that landed cost of basic food items like wheat, cooking gas, as well as key materials used in farming and construction, have shot up by as much as 67 percent in the past year.
An analysis of commodities shipped into the country last year based on data collated by the Kenya National Bureau of Statistics (KNBS) shows the cost of importing cooking oil rose the highest, followed by fertiliser, iron and steel.
The emerging global geopolitical and persistent supply chain concerns have exposed Kenya’s soft underbelly as a net importer of raw materials for manufacturing basic household items.
The rising cost of importation has hit households hardest, prompting some of them to postpone or scale down projects.
Families and businesses that had lined up housing projects are among the hardest hit, with landed cost of iron and steel climbing 50.30 percent last year to an average of Sh90,980.70 per metric tonne compared with Sh60,472.70 the year before.
And there’s no respite for the property developers with the import price for cement clinker, a key material in making of the building material, continuing to rise further after jumping 45.51 percent to Sh6,264 per tonne last year.
This has seen cement makers increase the final cost of the key building material by at least 10 percent per 50-kilo bag to more than Sh800 on average from Sh600 pre-Covid. This is further raising the cost of construction.
“If you know any product for which the price went down in the last three to four months, I would be happy to see that product which is cheaper now than what it was last year. There’s no product [whose price has dropped], I believe, because we are in a really high inflation environment,” Seddiq Hassani, the chief executive of Bamburi Cement #ticker:BAMB told Business Daily.
“The freight costs have also increased by more than 30 percent and we all know what is happening in the fuel market.”
The farmers have not been spared. The average landed cost of fertiliser last year averaged Sh51,168.10 per metric tonne, a 56.05 percent jump from Sh32,788.80 in the prior year, according to the KNBS data, sourced from the Kenya Revenue Authority.
This means a 50-kilo bag of the farming input was priced at Sh2,558.41 when it landed at the port of Mombasa compared with Sh1,639.44 in 2020.
On the other hand, the import price for a kilo of insecticides and fungicides went up 10.99 percent to Sh711.19, further piling pressure on cost of farm inputs before government levies, distribution costs and traders’ margins are included.
The largest jump was, however, recorded in the landed cost of vegetable oils and fats that climbed 67.39 percent per kilogramme to Sh130.40 last year from Sh77.90 in 2020.
This was largely on the back of a spike in global cost of edible vegetable oils such as crude palm oil, sunflower, soybean and corn oil last year, with the prices of final products such as cooking oil, soaps and cosmetics with glycerin going through the roof.
Palm oil, largely sourced from Indonesia and Malaysia, make up about 60 percent of global edible vegetable oil exports.
Palm oil production in Malaysia has been hurt by labour shortages and floods, soybean in Argentina and Brazil by drought, while the war in Ukraine has halted sunflower oil production.
“We have tried to minimise cost to consumers by being creative and innovative with other parts of the supply chain, but overall we have had no choice but increase the prices by about 10 percent,” Rajul Malde, the commercial director of Pwani Oil, the makers of products such as Fresh Fri cooking oil and Sawa soaps, told Business Daily on April 25.
“All forms of soaps — laundry, bar, beauty and medicated — and some cosmetics which use glycerin are all affected [by the rise in global prices of vegetable oil like crude palm oil].”
Families are further feeling a pinch on their budget from runaway prices of fuels like petrol and liquefied petroleum gas which had risen by nearly half in the year through last December.
A kilo of liquefied propane and butane — the main components in cooking gas— last year cost 45.09 percent more to Sh69.50 from Sh47.90 in the prior year.
This means the landed cost of refilling a 13-kilo LPG cylinder bumped to Sh903.50 from Sh622.70 a year earlier, excluding taxes, margins, distribution costs and other expenses.
KNBS data shows the average cost of refilling a 13-kilo cooking gas cylinder in the retail market went up 38.18 percent in the year through April to Sh2,866.
Other key commodities whose import prices have gone up from last year include wheat flour that climbed 34.20 percent to Sh58.01 per kilo from Sh43.23 in 2020.
The jump in wheat import price started even before Russia waged a fierce war on its former colony Ukraine, cutting off supplies from the two countries.
That has further exacerbated the cost of the key commodity whose final product is used in baking bread and cakes as well as making chapatis.
Russia accounted for 1.8 percent (Sh38.64 billion) of Kenya’s nearly Sh2.15 trillion import bill last year — comprising wheat (Sh17 billion), iron & steel (Sh9.67 billion), fertiliser (Sh6.57 billion) and others (Sh5.41 billion), according to the Central Bank of Kenya.
The CBK data further showed Ukraine made up a measly 0.9 percent (Sh19.32 billion) of the country’s imports — composed of wheat (Sh14.3 billion), soybean (Sh1.93 billion), legumes (Sh966.12 million) and others (Sh1.93 billion).
“There’s no question that the cost of living throughout the globe has shot through the roof as a result of Covid-19 and consequently … conflicts that are ongoing in Ukraine and Russia,” President Uhuru Kenyatta said on May 1 during the Labour Day celebrations.
“But we here in Kenya have taken measures that we consider sustainable. We know people would want more, but we can only do that which is sustainable …and can afford to cushion the vulnerable, including workers, and our farmers, especially on the cost of inputs.”
The Treasury has allocated Sh5.7 billion for fertiliser subsidy to benfit small-scale farmers in the ongoing main crop planting season after supplies from Russia were cut off because of sanctions, with a further Sh1.5 billion budgeted for the October-December short-rains period.
On the other hand, the Treasury had released Sh49.164 billion by April 14 under oil pump prices stabilisation scheme which started April last year to reduce the price of the essential commodity whose cost has been exacerbated by the Russia’s war on Ukraine.
The piling inflationary pressures as a result of rising cost of basic commodities largely on the back of global supply constraints and weakening shilling have been cited by Treasury Cabinet Secretary Ukur Yatani as posing a downside risk to Kenya’s economic recovery from Covid-19 knocks this year.
“The external challenges coming from Eastern Europe and fuel [cost] challenges are going to slow the pace of growth in 2022,” Mr Yatani said last Thursday.
7.5 percent growth
“Inflation has gone up as a result of the [US] dollar prices, increase in energy and that has now been complicated by what is going on in Eastern Europe. Actually, there’s scarcity of grain, especially wheat and also edible oil … and all these impact negatively on the pace of growth of the economy.”
Kenya’s economy recovered from 0.3 percent contraction in 2020 to grow 7.5 percent, but growth is forecast to slow down to below six percent.