•This is mainly on the recent increase on fuel prices which has affected cost of production, and high freight costs.
•At the onset of the coronavirus, in 2020, the government reduced the VAT rate to 14 per cent, among other measures, to cushion households and businesses.
The government should consider lowering VAT rate from the current 16 per cent to cushion consumers from the rising cost of living, manufacturers have said.
This, as they warn of a continued rise in the cost of both locally produced goods and imports, driven by high fuel prices, supply chain disruption, and the impact of the Russia-Ukraine war on global trade.
The war has led to a sharp increase in global crude oil prices which nearly hit a 14-year in recent weeks, with pump prices in the country hitting a historic high.
In its latest monthly fuel retail price review , the Energy and Petroleum Regulatory Authority (EPRA) announced a Sh5 increase on a litre of super petrol and diesel.
A litre of super petrol is now retailing at Sh134.72 in Nairobi from Sh129.72 while diesel is going for Sh115.60 from Sh110.60.
The price of kerosene mostly used by rural and urban families for cooking and lighting however remained unchanged, at Sh103.54 per litre.
“Considering that a large portion of the pump prices constitutes taxes and levies, fuel prices can only be expected to rise to the detriment of manufacturing and the economic wellbeing of Kenyans," Kenya Association OF Manufacturers CEO Phyllis Wakiaga told the Star.
This will adversely increase the cost of commodities, resulting in more pain for consumers, who are already struggling to make ends meet.
It is uncertain how long the ongoing war will last and as such, consumers shall continue to feel the pinch of the increase in commodity prices.
“To cushion its citizens from the effects, the government should consider lowering the VAT rate to enhance affordability of these commodities. Once the conflict is contained, and commodity prices stabilise, the VAT can then be restored to the original rate,” Wakiaga said.
Apart from oil, global wheat and fertiliser prices have sharply increased.
Kenya is a net importer of wheat, maize and fuel from Ukraine and Russia. The two countries account for 33 per cent of global wheat supplies.
Depending on the availability of wheat, prices are projected to cross $500 per tonne, which would translate to $550 per tonne upon landing in Nairobi.
Consequently, a 90kg bag of wheat would cost approximately Sh 5,650, approximately Sh180-200 for a 2kg packet, and approximately Sh60-67 for a loaf of bread.
Fertiliser prices are projected to go above Sh7,000 for a 50-kilo bag.
This is on increased costs and a shortage of nitrogen ( gas), a component in fertiliser making.
Global DAP fertiliser prices last week increased by 25 per cent with the impact expected to be felt in Kenya in the next month.
It is currently going for Sh5,600 per bag up from Sh2,500 a year ago.
An increase in agricultural inputs translates to increased prices as farmers pass the costs.
“Undeniably, the Russia-Ukraine conflict has affected the importation of these commodities into the country,” Wakiaga said.
The price of cooking oil has more than doubled in the past three weeks, blamed on a shortage of raw material used in manufacturing.
A shortage in the supply of sunflower has forced manufacturers to solely rely on crude palm oil for production of cooking oil and fats, of which Indonesia and Malaysia combined produce more than 90 per cent of global supplies.
Ukraine is the largest exporter of sunflower oil globally, responsible for up to 46 per cent of sunflower-seed and safflower oil production.
The second-largest producer is Russia, which exports about 23 per cent of the world’s supply.
An alternative Soybean oil supplies were also affected by the two-year drought in Argentina and Brazil due to La Nina; while Sunflower oil supplies have come to a sharp slump after the start of the Ukrainian crisis.
Prices of cement, steel, alcoholic and non-alcoholic drinks, cigarettes have also gone up.
Last week, the country was further hit by a milk shortage which has seen prices increase by up to Sh10.
This has been blamed on the recent drought period witnessed in the country, that affected production by farmers who struggled with feeds and other inputs.
According to the Retail Trade Association of Kenya (Retrak), retailers are getting slightly above 50 per cent of the orders issued.
"It is pretty bad," Retrak CEO Wambui Mbarire told the Star on the telephone, hoping the weather will improve to help turn around the current situation.
At the onset of the coronavirus, in 2020, the government reduced the VAT rate to 14 per cent, among other measures, to cushion households and businesses from the impact of the pandemic.
This helped stabilise retail prices across the market.