Transport

KAM allays fears of food shortage during elections

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Only one in 10 food transporters is likely to suspend operations during the polls. FILE PHOTO | NMG

Manufacturers have allayed fears of food shortages during the elections scheduled for Tuesday.

A month-long assessment by the Kenya Association of Manufacturers (KAM) shows that only one in 10 food transporters is likely to suspend operations during the polls.

By comparison, a high proportion of non-food items transporters are unlikely to operate between Tuesday and the time the final election results will be announced, shows the report dubbed KAM Manufacturing Barometer.

The survey shows that only 11 per cent of food and beverage makers have expressed fear over next week’s elections. Among the manufacturers, 20 per cent of the plastics and rubber are likely to scale down operations in the run-up to elections.

The segment is followed by chemical and allied manufacturers where 17 per cent have raised concerns, with construction and mining coming third at 10 per cent.

The sectors are expected to scale down production during the period, affecting uptake of goods from Mombasa port and transport of finished products from factories.

“Historically, elections have negatively impacted Kenya’s economy and this year’s election period is no different,” says KAM.

“Low demand in the domestic economy is identified as a key concern by 58 per cent of respondents as evidenced in the stock and capital optimisation levels,” the survey states, adding that respondents anticipate that the slowdown will persist three months after polls. Thirty one local manufacturers participated in the survey held between June 7 and July 7. The firms said their optimism had been shattered by the adverse business environment leading to the polls.

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“The outlook for the next three months is generally poor in terms of new orders, profits, output, employment and volume of output,” the report says.

A dip in manufacturing activities directly affects jobs and contracts in the logistics sector as many firms in the sub-sector suspend operations until political temperatures cool down. The survey adds that delayed payments and the high cost of credit have forced many to operate below capacity.

Of those surveyed, 54 per cent said that accessibility to credit was a major impediment to their daily activities.

“Late payment of invoices to small businesses has stifled enterprises and poses risks such as cash-flow challenges, reliance on costly bank loans, job losses, and bankruptcy,” the report says.

It shows that 45 per cent of the respondents were also concerned over rising prices of raw materials where suppliers increasingly demand to be paid upfront or on delivery.

“Irrespective of industry sector or company-specific circumstances, raw material price escalations are a daunting reality. Import levies (import declaration fund and railway development levy) coupled with high cost of transport have continued to affect the sector adversely,” the study say.

The lukewarm view is further bolstered by falling investments which last year saw credit to the manufacturing sector drop by four per cent to Sh277.4 billion compared to 2015.

The report shows that 55 per cent of manufacturers surveyed do not plan major new capital investments during the next 12 months and 45 per cent do.

Neighbouring Uganda, Tanzania, DRC and Rwanda — which heavily rely on Mombasa port for their exports and imports — have also shifted base to Tanzania’s Dar-es-Salaam port citing uncertainty on Kenyan routes where in the past some of their products were vandalised or stolen.

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