Local manufacturers worry as demand softens on Covid-19

Kenyan factories have ruled out shortage of consumer goods in the short-term, but are more worried about weak demand with families grappling with depressed earnings due to the contagious Covid-19 outbreak.

The Kenya Association of Manufacturers (KAM), the sector lobby, said supply of raw materials and intermediate goods is stabilising with production in China picking up after about three months of a near lockdown.

This is after Nairobi late last month allowed cargo ships and planes to bring in consignments.

KAM chairman Sachen Gudka said supply of most materials was normalising, with focus now shifting to softening domestic demand as a result of public health measures by Ministry of Health to contain the fast-spreading disease.

The measures, including a 7pm-5am curfew for persons not offering essential services, has seen some businesses close shop while majority have cut down on operating hours.

“We are now not worried about the supply side … because supplies are stabilising and in China the economy is starting to get back in full shape. So whatever temporary blip people had will now be sorted out,” Mr Gudka said.

“But are worried about the demand side because basically the economy is operating at what we call half-throttle.”

President Uhuru Kenyatta has spelt out a series of measures to stimulate demand by helping businesses and families make some cash savings. The measures, it is hoped, will boost purchasing power as the country battles the deadly Covid-19.

Value Added Tax (VAT) was reduced to 14 per cent from 16 per cent, while a raft of tax cuts are awaiting parliamentary debate and approval later in the week.

“To me, the measures that were announced are going to be of more use once we have dealt with the virus and it has gone away than while the spread of the virus is going on. This is because a lot of our people earn in the day and eat in the evening. If they are not earning, they are not eating, and so we needed to find ways to get these food to them,” said Nikhil Hira, a tax consultant and director at law firm Bowmans.

The disruption in supply chains last month had hit textile and apparel the hardest followed by food and beverages, plastics and rubber as well as building and construction materials, according to a KAM survey early last month.

The survey findings showed that eight in 10 factories in Kenya (82.16 per cent) rely on China either for supply of materials and intermediate goods they use to produce goods for local consumption or as an export destination.

A supply disruption after Beijing took stringent public health measures to stem the spread of the death-threatening virus had exposed the manufacturers to shortage of raw materials, leading to increased input costs.