Pwani Oil has temporarily shut down its oil plant due to shortage of US dollars to order for raw materials.
The manufacturer of Freshfri, Salit and Fry Mate cooking oils said bankers were only processing half of the dollar orders it requires to pay the 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.”
In the recent past, the Central Bank of Kenya (CBK) Patrick Njoroge has dismissed claims by the Kenya Association of Manufacturers (KAM) that there is a dollar shortage in the country.
“At the moment, based on the inflows from banks, we are only able to source between $500,000 and $1 million a day against a requirement of $2- $2.5 million a day. So we are only getting half of what we need, sometimes even less than half,” Mr Malde said.
“Terms are normally cash against documents. So when they ship a container out, they will send us copy of the documents and we need to pay to get those documents to clear the cargo. Now that’s where the challenge is because if there isn’t enough dollars available, how do you pay and get the documents to clear?”
The manufacturer has asked the CBK to intervene and release some of the dollar reserves that they are holding to stablise the dollar demand in Kenya
“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.”
Kenya’s foreign exchange reserves last Thursday grew to $8.219 billion, or the equivalent of 4.89 months of import cover, from $8.177 billion a week earlier.