The cost of living could fall starting September after a possible reduction of petroleum prices, Bidco Africa Chairman Vimal Shah has said.
Post-election jitters and production costs are likely to reduce significantly as Kenya shakes off a drought that, in addition to several global factors, has caused a record high cost of living.
Kenya’s annual inflation hit 8.32 per cent in July with Vimal explaining that it is mainly imported owing to global logistics challenges for over a year now.
“The Russia-Ukraine war spoilt everything but we are getting over that too because shipments are starting to come,” he said in an interview with Bloomberg.
The shilling continues to struggle against the dollar and a shortage in the supply of the greenback has not helped local manufacturers who import a bulk of their raw materials.
An Indonesian ban to sell palm oil for some time, months ago also led to a global hike in cooking oil, which affected fast-moving consumer products manufacturers such as Bidco.
Vimal, however, said the country has enough foreign exchange reserves, noting that a reduction of prices of edible oils and fewer logistical challenges will enable manufacturers to lower the costs of finished products, passing on the benefit to consumers.
“In the last year, Indonesia banned the export of palm oil. Shipments were stopped and edible oils rose from $600 (Sh71,400) per tonne to $2,000 (Sh238,000) a tonne. It has now come down to $1,200 (Sh142,000) per tonne in the September shipment. The effect will be passed on to the public starting September, by Sh20, or Sh30, or Sh40. I don’t think it will go up again,” he said.
He is also confident that local agriculture, which is mainly rain-fed, will pick up, bucking the trend after an election fever, and going into December, there will be more maize locally available.
“Maize will be aplenty and affordable and subsidies will not be needed,” he said regarding the scrapping of a subsidy that was earlier extended to millers. The fuel subsidy will also be removed.
The Bidco Africa chairman added that the next government should prioritise improving the country’s productivity and competitiveness for exports, while doing away with taxes that hinder production, especially in raw materials.
He called for increased value addition and reduction of logistical costs that hinder access to markets. He expects the government to cut down on wastage, saying that Kenya is “collecting enough taxes but we are spending it on non-productive assets and recurrent costs” and that “whoever comes in has to look into radical surgery.”
Vimal lauded President Uhuru Kenyatta’s regime for the infrastructural projects that have been a key focus. He said the roads and railway lines will reduce the cost of logistics, time taken to deliver goods, and wastage.
Such a model of infrastructural development, where China designs, finances, builds, owns, operates and then transfers the infrastructure, does not hit the balance sheet of Kenya, and such infrastructure is welcome “as long as loans are serviceable and infrastructure is built on a productive basis,” he said.
Bidco Africa has ramped up agricultural production, improving their agricultural value chain by putting up huge investments in palm oil plantations in Uganda and Kenya, and asking people to farm more sunflower, soya beans and maize to increase local production of oil and animal feeds.