Manufacturers say not yet out of Covid woods despite growth

The second quarter growth numbers attributed to the manufacturing sector was inflationary driven and not increased productivity, players in the sector have said, arguing that the industry is still hurting from the Covid-19 pandemic.

The sector lobby, the Kenya Association of Manufacturers (KAM), says the strong growth in the three months to June was mainly due to increases in prices, triggered by supply restraints.

Data published by the Kenya National Bureau of Statistics (KNBS) show the sector’s real GDP – that does not factor in inflation - grew by 9.6 percent in the quarter to June compared to a contraction of 4.7 percent in the same period of 2020.

KNBS attributed the expansion to food sub-sector, dairy products, bakery products, assembly of motor vehicle, and manufacture of paper and paper products.

Manufactures, however said the recovery indicates increase in prices, as adjusted by companies to cover costs, and reduce loses.

“The sector has been growing because of the value and because things are getting more expensive. It is not necessarily the volume that is going up. It is just the price of things going higher and higher,” KAM chairman Mr Mucai Kuhinya said.

The sector is battling to operate amid disrupted global supply chains, global oil prices, volatility of shilling and input costs increasing cost of production.

“It is very hard to forecast growth for this sector ahead because also things are very difficult in terms of how much fluctuation there is,” Mr Kuhinya said.

Over the quarter, credit advanced to enterprises in manufacturing activity declined by 0.9 per cent to stand at Sh1.26 trillion in the second quarter of 2021, indicating relaxed investments.

The quarterly growth follows introduction of new products such as personal protective equipment such as masks and gloves.