Manufacturers’ top priorities are improving cashflow, increasing market share and reducing costs, a study has revealed.
The survey conducted one year after the COVID-19 pandemic broke out in the country by the Kenya Association of Manufacturers (KAM) and KPMG affirms that the COVID-19 pandemic has had a devastating impact on manufacturers which saw them reduce sales, negatively impacting on their bottom line.
Speaking during the launch, KAM Chairman, Mucai Kunyiha noted that manufacturers continue to operate in a constrained business environment, further exacerbated by the rolling back of measures that were put in place to cushion the economy from shocks arising out of the virus.
“From the survey, 18 percent of surveyed firms experienced a reduced sales turnover of more than 30 percent, attributed to a fall in demand for products by consumers. The Food and Beverage, Automotive and Textile and Apparel Sectors experienced the most reduction in their turnover, at 15 percent, 12 percent and 12 percent respectively,” said Mr. Kunyiha.
Close to a third of surveyed firms operated below half their production capacity, in comparison to 55 percent of the surveyed firms in 2020.
The Automotive, and Plastic and Rubber Sectors were the most affected. Other challenges facing the manufacturing sector, one year on, are the weakening Kenyan shilling which drives up the cost of importation, increased cost of doing business because of logistics and the high cost of raw materials and intermediate products.
Mr. Kunyiha urged the government to institute measures to bolster economic recovery and drive the resilience and sustainability of the local manufacturing sector, saying, “The health of our economy, follows that of the population. As such, our focus as a country should be to contain the pandemic, by continuously strengthening our health systems. Additionally, government needs to avoid any policy interventions that increase the cost of doing business, develop domestic value chains and address demand and liquidity challenges.”
KPMG East Africa Partner, Smita Sanghrajka, highlighted manufacturers’ shifting focus. “Last year, the top three priorities for manufacturers were to increase profitability, increase revenue and increase domestic market share last year. One year down the line, improving cashflow remains a top priority for 67 percent of manufacturers, 65 percent look to increase their market share and reducing costs for 65 percent,” explained Ms. Sanghrajka.
The study is titled, “Impact of the COVID-19 Pandemic on the Manufacturing Sector: One Year On.”
The report follows the 2020 survey on the Impact of COVID-19 on the Manufacturing Sector, developed by KAM and KPMG. This year’s study shall guide KAM’s engagement with government, to develop policy measures geared towards driving the resilience and sustainability of the local manufacturing sector.