KNBS: Production costs up as Kenya Kwanza taxes kick in

Crown Paint's Sh400 million plant in Kisumu.  [Courtesy]

Chemical and chemical products recorded the highest increase in manufacturing prices for the year ending December 2023 with a percentage change of 30.94.

Data from the Kenya National Bureau of Statistics(KNBS) also lists the manufacture of basic metals and non-metallic mineral products as the other sectors in the manufacturing space that had the most shift in prices.

The percentage change of Producer Price Indices for the manufacture of basic metals over the year was 27.30 per cent while that of non-metallic mineral products was 27.12. Printing and reproduction of recorded media changed by 9.14 per cent over the year.

Producer Price Indices or PPI is the change in prices of products sold by the manufacturer. It is similar to the farm gate price for agricultural products. This price is used as the base for determining a possible change in the price of products in the market.

An increase in the cost of production of an item means an increase in the price of that product when the consumer finally gets it notwithstanding the transport costs and taxes and margins by the end seller.

KNBS in its quarter four Producer Price Index reports that the overall producer prices in December 2023 rose by 3.97 per cent relative to September 2023 prices.

“Over the same period, manufacture of other non-metallic mineral products recorded the highest price increase of 19.33 per cent while the manufacture of leather and related products had the highest price decline of 2.58 per cent,” says the government statistician.

It adds: “Over the last year, the highest price increase was in chemical and chemical products at 30.94 per cent while the highest price decrease was in the manufacture of wearing apparel at 6.40 per cent.”

The change in price for chemical and chemical products explains why the price of paint shot up during the year.

While the Producer Price Index for the manufacture of food products during the quarter ending December 2023 dropped by 1.28 per cent, reliably explained by improved rainfall and bumper maize harvest, over the year it was up 2.01 per cent.

Other manufacturing sectors that recorded a drop within the year are the manufacture of textiles (by 0.98 per cent), the manufacture of wearing apparel (by 6.40 per cent) and the manufacture of paper and paper products (0.57 per cent).

For the better part of 2023, manufacturers through their lobby, Kenya Association of Manufacturers(KAM), voiced their concerns over the Kenya Kwanza tax measures among them the implementation of the Excise Goods Management System (EGMS) that increased the rates of excise stamps.

This increase affected manufacturers of cosmetics, bottled water, juices and other non-alcoholic drinks, tobacco and nicotine producers, and alcoholic beverage producers.

A statement from KAM indicated that increased Excise Goods Management System stamp fees up to over 100 per cent and beyond the current market costs shall have a detrimental effect on consumers and manufacturers due to increased cost of production and the cost of finished products.

“The e increment comes barely five months after a 6.3 per cent inflation adjustment on specific excise tax rates was effected on October 1, 2022, impacting cosmetics, confectionery, alcoholic and non-alcoholic beverages including bottled water, and tobacco and nicotine products among other products,” the statement reads.