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Lewis Njoka @LewisNjoka

Kenya Private Sector Alliance (Kepsa) wants local manufacturers to increase production to bridge the supply gap brought about by the lockdown of China following coronavirus outbreak.

The calls come on the back of a recent survey conducted by the alliance which shows that many of the manufacturers were considering increasing prices of goods to factor in the pricier raw materials that they are importing from alternative markets. 

“Instead of increasing prices, let us enhance production locally so that prices do not go up. Prices of some goods will go up if we cannot produce them locally.

Whatever can be produced here, or sourced elsewhere at the same prices, then there will be no need of increasing prices,” said Kepsa chief executive Carol Karuga.

She urged Kepsa members to consider importing from the wider East African community saying this was a good opportunity to grow manufacturing in the region.

About 82 per cent of local manufacturers who source their inputs from China face direct risk of supply chain disruption, according to Kepsa.

Of the 18 per cent who neither source inputs from nor export to China, about 67 per cent still face the risk of supply chain disruption since they purchase their raw materials from traders who source them from China.

Bilateral trade between Kenya and China stood at about Sh382 billion in 2018 with Sh371 billion worth of imports and Sh11 billion worth of exports.

Emergence of the dreaded virus has disrupted supply chains and reduced trade activity with China and other Far East countries, a major source of raw materials for local manufacturers. 

As a result of restricted movement, local businesses are experiencing delayed deliveries and are beginning to run out of supplies forcing them to turn to the more expensive alternative markets.

Worse still, these business interruptions are affecting their ability to meet their financial obligation with banks, a situation which could land them in financial trouble in the near future. 

“We are suffering from shortages of various inputs from China and have had to obtain them from alternative markets such as Brazil which is increasing cost. We have started making plans to purchase preventive gadgets which are basically a cost that will be incurred out of our normal budget,” reads the Kepsa report in part.

“About 57 per cent of manufacturers have been forced to outsource inputs from other countries as a way of coping with the disruption of supply from China while 29 per cent have resorted to sourcing from other export markets outside China and 13 per cent have downsized their production capacity. Others have resorted to air freight goods to reduce lead time,” it adds.

Kepsa anticipates that most of the export-dependent investments will suffer severe setback as most of raw materials are sourced from Asia.  

To mitigate the effects of these new developments, businesses are taking more stocks than they would ordinarily, are conserving what they have and are in constant communication with suppliers.