Prices of commodities to go up as China lockdown bites

Wednesday, March 4th, 2020 00:00 | By
China products.

Seth Onyango @SethManex

Kenya’s economy has begun to exhibit symptoms of the coronavirus fever as imports from China, which constitute 40 per cent of the country’s net import, take a hit.

Retailers and suppliers in Gikomba, Kamukunji and downtown Nairobi are warning of likely price hikes later this month and disruptions of the supply chain in the wake of the viral outbreak.

The development comes just days after four big cargo ships that supply goods from China failed to dock at Mombasa port for the second consecutive month following the viral outbreak. The situation could get out of hand going what analysts say.

With heavy reliance on cheap imports from the populous Asian market, various sectors of Kenya’s economy are bound to suffer as the fatal virus constrains supply chain.

There is therefore an expected surge in the prices of goods, majorly electronics mobile phones, TVs, fridges, furniture, clothing and some fast moving small household items.

Supply disruption

Already, imports from China have plunged by Sh58.6 billion in the first two months of the year, indicative of a possible supply disruptions of household goods with imports data from Kenya Trade Network Agency (KenTrade) showing value of goods ordered from China in January and February plunged 36.63 per cent compared to a similar period in 2019.

UN Commodity Trade Statistics Database (Comtrade) estimates that Kenya’s imports from China were $3.66 billion (Sh307 billion) in 2018, slightly more than last year’s.

Economist Raphael Matu says that things could get worse before they got better asserting local businesses will need to seek an alternative to replenish depleting stocks.

“We need to look at sourcing the goods locally (through domestic manufacturing) or raiding other markets like Europe and America,” he told Business Hub on phone.

But there is a caveat; goods from Europe and the US come with heavy price tags due to cost of labour.

It is on that premise that most African nations like Kenya source relatively affordable goods from China, although their quality has been put under a microscope.

Matu projected economic activities will slow in the medium term, ultimately affecting the economy.

For city trader Kevin Obongo, sourcing goods from other markets is not an option.

“Goods from other countries are too expensive for our consumers. Nobody will be able to buy.

So far we have begun to increase the prices of goods slowly as we adopt a wait and see approach on how things are going to move,” said Obongo, who deals in electronics and hardware.

In what could slow the construction sector, Obongo said there is a sharp decline in the importation of steel and other metal materials with prices going off the roof.

A spot check by Business Hub revealed a significant number of traders had depleted stock in Gikomba, Kamukunji and downtown Nairobi amid concerns that prices could soar by about a third as supplies from china dips.

“Everything is going to stall unless the coronavirus is contained soon...we will not be in business,” said Obongo.

Alternative sources

Emily Nyakago, a broker of clothes and shoes from China operating in Gikomba said they “have depleted stocks from China and they were now looking for alternative sources, like Canada and Europe” to sustain their businesses.

On tourism, Matu argued that earnings will drop as more people become apprehensive about travelling, given that China is a lucrative tourism market for most economies.

In 2018, approximately 162 million outbound journeys of Chinese citizens were registered with 155 million of these coming for private reasons.

Although official figures are not out yet, China outbound trips were projected to reach 178.4 million in 2019.

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