Kenyan cooking oil manufacturer Pwani Oil temporarily halts operations over shortage of raw materials, forex

KENYA – Pwani Oil Products Limited, the makers of popular household cooking oils-Freshfri, Salit, and Fry Mate, has temporarily shut down its operations following shortage of raw materials coupled by insufficient dollars to settle supplier bills on time.

The cooking oil manufacturer has indicated that countries such as Indonesia had suspended exports of crucial commodities like palm oil as a short-term measure after domestic prices of cooking oil soared more than 50 percent.

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The move by the world’s biggest producer of the key edible oil shocked the global market resulting in shortage of the commodity.

Currently, Kenya mainly imports vegetable oils such as sunflower oils, soybean, corn oil, and crude palm oil from Malaysia after Indonesia set tight export rules following its resumption of trade.

There has, however, been weak production over the last six months in Malaysia due to floods and labor shortage.

The consumer goods manufacturer has further indicated that its bankers are only processing half of the dollar orders it requires to pay the suppliers of crude palm oil imports from Malaysia amid stiff global competition, reports Business Daily.

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The firm has indicated it could only get between US$500,000 to US$1m per day while it needs at least US$2- US$2.5 million a day to keep its plant running and clear any shipments at the Mombasa port.

“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.”

The Central Bank of Kenya Governor Patrick Njoroge recently dismissed concerns by the Kenya Association of Manufacturers (KAM) that persistent dollar shortages were triggering the emergence of a parallel exchange rate where lenders buy and sell well above the printed official rate.

Dr Njoroge maintained the foreign exchange market transacts about US$2 billion of the US currency every month, which he indicated was enough to meet demand from importers and companies for payments like dividends.

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“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.

“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 said.

To ease the burden, Pwani Oil has taken a radical route in seeking its clients to pay for goods in US dollars in a bid to acquire more stock of the currency which it uses to import raw materials with.

It clarified to its customers on the need for dollars for local purchases, saying the use of the US currency is optional.

The global supply chains have been severely impacted by the ongoing conflict in Ukraine and the COVID-19 pandemic which have pushed prices of food staples to historically high levels.

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