Cost of Edible Oils to Increase as Dollar Shortage Hits Kapa Oil Refineries

Kapa Oil Refineries, the maker of a range of cooking oil and soap brands like Rina vegetable oil as well as Toss detergents, has decried operating below its capacity and refineries due to dollar shortage and constraints in the global supply chain of crude palm oil.

The company has stated that further escalation of the situation in the country might lead to further disruptions which will cause Shortages and further hiked prices of commodities such as cooking oil.

“Our operations have been hampered due to the dollar scarcity and inability to access raw materials,” Kapa Oil Refineries marketing manager Sid Shah told the Business Daily in an interview.

“This could lead to a fresh round of hike in prices for edible oils,” Mr. Shah whose firm also makes Toss and Prestige brands of soap and margarine warned.

Kapa Oil Refineries is now the second edible oil producer after Pwani Oil to reveal how the dollar shortage amid raw material rationing has disrupted its manufacturing process.

Freshfri and Fry Mate cooking oils – on Monday announced that it had temporarily frozen part of its operations due to a shortage of raw materials caused by difficulties in accessing the dollar to pay suppliers on time.

Kenya Association of Manufacturers has stated that the delays in acquiring the requisite USD for imports are impacting relations with suppliers, which have been built over time, with some now requiring more expensive Letters of Credit to transact.

KAM last week noted that its members were buying the dollar at more than 120 shillings compared to the then central bank’s official exchange rate of 116.81 units, stoking fears of a parallel exchange rate market.

It’s now clear that many manufacturers in Kenya highly depend on the dollar, and the inability to access it at the local banks to fund capital goods imports is threatening product shortages that have the potential of increasing the prices of consumer goods.

Some manufacturers are already opting to sell local products in dollars.

Kenyan manufacturers have o choice but to pay top dollar for edible oils, since other alternatives such as soybean, sunflower, and rapeseed oil are running at costly prices with only limited stock left, due to adverse weather and Russia’s invasion of Ukraine.

Indonesia accounts for about a third of the global crude palm oil exports which make up 60 percent of the world’s edible vegetable oil shipments.

Cooking oil prices have already jumped more than double in the few months. A five-liter Fresh Fri Cooking oil is now retailing at 2,014 shillings at Naivas supermarket while the same quantity of Rina Cooking oil is 1,980 shillings.