Pwani Oils has temporarily shut down operations due to what it says is a shortage of raw materials as a result of challenges in accessing dollars to pay suppliers.
According to the manufacturer of Fresh Fri, Salit and Fry Mate cooking oils, its bankers are processing merely half of the dollar requests it needs to pay suppliers of crude palm oil from Malaysia.
“Getting sufficient amount of dollars required to support the factory in terms of getting sufficient raw materials is not happening,” Business Daily quoted Pwani Oil Commercial Director Rajul Malde as having said on Friday.
“We are not even running the plant right now because of lack of raw materials [crude palm oil].”
Pwani said the situation had further been worsened by a global stiff competition and increased cost of the raw material amid Indonesia’s restriction on palm oil exports.
“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,” Mr. Malde added.
The Central Bank of Kenya (CBK) last month rejected claims of dollar shortages by the Kenya Association of Manufacturers (KAM), who said that they are experiencing difficulties in accessing US dollars from the market.
CBK Governor Patrick Njoroge said the country’s current FX market remains liquid with US dollar transactions rounding off to Ksh.233.5 billion ($2 billion) on average each month.
He added that dollar requirements by the manufacturers barely scratches the monthly cap.
“For a sector importing goods worth between $90 and $100 million monthly, the figure is nowhere near the $2 billion we are putting out there,” Governor Njoroge said on May 31.
Currently, Kenya mainly imports vegetable oils such as sunflower oils, soybean, corn oil, and crude palm oil from Malaysia after Indonesia’s tight export rules.
There has, however, been weak production over the last six months in Malaysia due to floods and labor shortages.
“We are expecting one consignment [of palm oil] in the middle of this month and then after that there’s no more supply until the end of July. The one that is coming next month is dependent on dollar availability—whether we will be able to pay to release that cargo,” Mr Malde added.