TOUGH TIMES

Businesses risk closure on Chinese imports drop

Factories and businesses in China, Kenya's biggest import source , have closed over the corona virus cutting global supply chain.

In Summary

•A Large number of shipping lines are now avoiding ports in China, a move that has threatened the global supply chain with local businesses feeling the heat.

•Kenya National Chamber of Commerce and Industry says businesses are running out of stock, with a number facing closure.

Mobile phones on display at a Shop in Mombasa.China is a key import source
Mobile phones on display at a Shop in Mombasa.China is a key import source
Image: FILE

Hundreds of local businesses now face closure as imports on raw material and cheaper finished goods from China dwindle, amid a widespread shutdown of factories and enterprises over the Coronavirus.

Manufactures, retailers and logistic institutions have warned that if the situation in China persists, local traders are likely to run out of stock and close as only a few can manage to outsource goods from other “costly”markets.

Data from the Kenya Trade Network Agency(KenTrade) shows a 38.7 per cent drop in the value of imports from China in January.

According to the agency which oversees the country's trading platform-Single Window System, the value of imports dropped to Sh54.9 billion, compared to Sh89.6 billion in January 2019.

The virus that was officially confirmed on January 7, before the World Health Organization declared it a global emergency on January 30, had killed at least 2,595 people in mainland China by Monday with more than 79,000 infections globally.

Hundreds of factories have remained closed as a control measure with a large number of shipping lines avoiding China's 34 major ports, a move that has threatened the global supply chain.

Clearing agents in Mombasa have reported reduced activities on imports from China, Kenya's biggest source where a total of Sh324.9 billion worth of goods came from between January and November last year,Kenya National Bureau of Statistics data shows.

“Volumes have reduced though the full effect is yet to be felt. If the situation persist, we are likely to see a further drop on imports from China being cleared at the port,” Kenya International Freight and Warehousing Association chairman Roy Mwanthi told the Star.

Synresins Limited, a key importer of raw material for manufacturing of resin(used in building as adhesives, coatings or as a construction material when a strong bond is required), yesterday reported effects of China economic slowdown.

“The biggest challenge is delays on arrival of goods considering we import a big part of our raw materials.Looking for alternate specilaities from other nations is not fast and cost effective,” CEO Mira Shah said.

Small traders are staring at grim days according to Nairobi Importers and Small Traders Association chairman Samuel Karanja.

“Most of us get goods from China, which we can’t do now,” he said.

Kenya Ports Authority (KPA) is concerned reduced activities in China could affect shipping trends and local businesses.

“Shipping deals in goods which must come from factories. If it persists, possibly people will not travel to execute business. That will affect exports and imports hence shipping,”head of corporate affairs Bernard Osero told the Star.

It takes about 30 days to ship cargo via sea from China.

Kenya National Chamber of Commerce and Industry yesterday confirmed most affected businesses are importers of raw material for manufacturing, clothing and textile, plastic and other fast moving goods, sanitary goods, beauty products and electronics.

“Businesses are running out of stock and they will be forced to either source from other markets or suspend operations,” KNCCI Mombasa chapter CEO James Kitavi said.

Kenya receives at least two to three ships every week which have either originated from China or called at Ports in China enroute to Africa.

KPA has been forced to increase surveillance on vessels sailing to Kenya, including screening at high seas before vessels are allowed entry into the port.

Kenya Export Promotion and Branding Agency says with China being a leading supplier and purchaser of goods and services, the virus effects will cause economic shock.

“We hope that the menace will be curtailed as soon as possible so that the economies can progress normally,” CEO Peter Biwott said.

Meanwhile, he has called for aggressive diversification of markets with a focus on Africa, as Kenya remains key in unlocking economic potential through trade.

The Chinese Embassy in Kenya on Monday however said 90 per cent of major enterprises in eastern China's Zhejiang Province have resumed.

Zhejiang's economy is based on electromechanical industries, textiles, chemical industries, food, and construction materials.

“The Ministry of Commerce will facilitate more foreign companies in resuming work and production in order to stabilise the global supply chain,” the Embassy said in a statement.