By Judith Gicobi
Pwani Oil, the maker of Freshfri, Salit, and Fry Mate cooking oils, has temporarily closed its oil facility due to a scarcity of raw materials, which it blames on its inability to pay suppliers on time due to a lack of dollars.
In the face of fierce worldwide competition, the consumer goods company stated on Friday that its bankers were only processing half of the dollar orders it needed to pay suppliers of crude palm oil imports from Malaysia.
“Getting sufficient amount of dollars required to support the factory in terms of getting sufficient raw materials is not happening. We are not even running the plant right now because of lack of raw materials [crude palm oil],” Pwani Oil Commercial Director Rajul Malde said.
“We are competing for the same oil with the rest of the world and, therefore, prices are high. Added to that, we can’t pay on time so we don’t get priority in supply.”
Last week, Governor of the Central Bank of Kenya Patrick Njoroge dismissed concerns raised by the Kenya Association of Manufacturers (KAM) that persistent dollar shortages were leading to the emergence of a parallel exchange rate in which lenders buy and sell considerably above the printed official rate.
Dr. Njoroge stated that the foreign exchange market transacts roughly $2 billion in US currency per month, which he claims is sufficient to meet needs from importers and firms for dividend payments.
“The situation can only improve if the dollar situation improves. And I am not seeing the dollar situation improving on its own without the central bank intervening and releasing some of the dollar reserves that they are holding to stablise the dollar demand in Kenya,” Mr Malde added.
KAM reported in April that banks had enforced dollar buying limits, making it impossible to get sufficient forex to meet supplier requirements and limiting the capacity to negotiate favorable spot market prices.