DEFICIENCY

Industries warn of product shortage, seek Sh27Bn VAT refund

87.23% of manufacturers foresee a shortage in finished products.

In Summary

•77.97 per cent of the companies source their inputs or export to China.

•Manufacturers are seeking up to Sh27 billion in VAT refunds to help them remain afloat.

Kenya Association of Manufacturers chief executive Phyllis Wakiaga. Photo/File
Kenya Association of Manufacturers chief executive Phyllis Wakiaga. Photo/File

Manufacturers are warning of an imminent shortage in finished products in the next three months as disruption in the global supply chain impacts on local industries.

This is mainly due to the reduced supply of inputs from China, the Kenya Association of Manufacturers (KAM) has noted.

A survey by KAM conducted in the first quarter of 2020  revealed 77.97 per cent of the companies under its umbrella source their inputs or export to China.

 

Out of the 22.03 per cent that neither source inputs nor export to China, 55.56 per cent of them face a risk of supply chain disruption due to reliance on suppliers who source them from China.

“We have gleaned that a disruption in the global supply chains has seen local manufactures anticipate challenges in diminishing stock and constraints to fulfill clients’ orders,” KAM CEO Phyllis Wakiaga said.

There has also been hikes in the cost of raw materials as transport cost rises and increased costs of finished products, The association noted yesterday.

“87.23 per cent of manufacturers foresee a shortage in their finished product within the next three months,” Wakiaga told the Star.

Top imports from China,  include electrical equipment and accessories, mechanical appliances, nuclear reactors, railway or tramway locomotives, iron and steel, furniture and textile.

With the disruption in China, mainly as a result of coronavirus, 26.09 per cent of manufacturers have resorted to other export markets outside China while 23.91 per cent of manufacturers downsized their production capacity.

“From our survey, our members singled out Turkey and India as alternative sources of raw materials or intermediate inputs, whereas other manufacturers resorted to reducing their production capacity to cope with reduced supply,” KAM told the Star.

 
 

Manufacturers are seeking up to Sh27 billion in VAT refunds to help them remain afloat.

Last Friday the government started disbursing Sh13 billion owed in pending bills and a further Sh10 billion tax refunds as part of Covid-19 economic stimulus to boost manufacturers and suppliers.

 

The Sh13 billion to suppliers is part of Sh49 billion to be released by the government by the end of this financial year pending verification.

KAM yesterday said it is banking on the refunds to  boost liquidity among industries and businesses

“Some manufacturers had even resolved to stop exports to reduce the impact of non-refunded excess VAT on their cash flows, KAM CEO Phyllis Wakiaga told the Star.