This archive report was first published on 25 October 2019.
Published on October 25, 2019, economist Jaidi Kisero warned that the country's prevailing sluggish economic conditions could drive upward consumer prices in key segments of the manufacturing sector.
He pointed out that cement manufacturers were at a point where cash-flow generated by activity did not cover the capital invested, making it paradoxical that per capita cement consumption is considered a proxy measure for GDP growth.
According to Kisero, one of the key factors in the declining fortunes of cement manufacturers was the gradual slowdown in infrastructure spending at both the county and national level over the last five years.
He also attributed the decline to accumulated arrears and pending bills owed to government contractors, low pace in execution of development budgets, and lack of capacity to deliver projects within stipulated time.
Official statisticians may deny anaemic growth conditions, but Kisero argued that the evidence was in the numbers: profit warnings, redundancies, dip in electricity consumption, slow take-up of credit by the manufacturing sector, and declining trends in the growth of the cement sector.
Manufacturing has been shrinking despite rosy statistics, and the performance of the construction sector is where real growth can be seen, touched, or smelt.
Installed capacity in cement production has increased by 50 percent over the past five years, but consumption has been either declining or flat-lining since 2016, with a drastic fall of negative four percent growth in 2017.
Excess capacity utilisation rates, an attrition game between firms, and soaring energy costs have also contributed to the sector's decline.
With clinker prices projected to go up by four percent and freight costs expected to increase by at least four percent, Kisero predicted that cement companies and the manufacturing sector as a whole are in bleak times.
He concluded that a price correction will be inevitable when manufacturers face short-term demand uncertainty, decline in volumes, low capacity utilisation rates, and an environment characterised by falling profitability.
