Manufacturers decry high energy costs, low patronage

Secretary, Pan-African Manufacturers Association, Segun Ajayi-Kadir, has again decried the ripple effects of rising energy prices caused by the ongoing unrest on African manufacturing; which he said are becoming particularly significant.

He said because most industries and businesses rely heavily on petroleum products for electricity generation, logistics and packaging materials such as plastics; as a result, the rising energy costs has translated into increased production expenses for all manufacturers, triggered higher prices and weakened demand for industrial goods.

He warned that if the situation continues unabated, consumers would be faced with a sharp rise in the cost of goods and when they reach their elastic limit, manufacturers would be saddled with unsold inventory. This he warned might lead to the collapse of some industries.

Speaking via the association’s monthly report, he went on to add that disruptions to global shipping routes have raised the cost of importing industrial inputs and extended delivery times. This he said, has created further challenges for manufacturers that depend on timely access to machinery, raw materials and intermediate goods.

Furthermore he noted, the conflict has reinforced the strong relationship between global oil prices and currency movements.

“As crude oil prices rise in the international market, demand for the U.S. dollar tends to increase, strengthening the currency relative to others. This has contributed to the depreciation of many African currencies, further increasing the cost of imported industrial inputs and exacerbating inflationary pressures.”

Her went on to further warn that disruptions in fertilizer supply could indirectly affect agro-processing industries.

“Sustained constraints in fertilizer availability are likely to increase agricultural production costs and reduce the supply of raw materials for food processing industries across the continent,” he said.

Highlighting the urgent need to strengthen the resilience of Africa’s manufacturing sector, he said the development of domestic refineries and strategic oil reserves is critical for African governments to pursue, to guard against future shocks arising from energy supply disruptions, as witnessed in the current geopolitical crisis.

“We must reduce excessive dependence on imported industrial inputs by strengthening backward integration, regional manufacturing networks and local value chains.

“A stable and affordable energy supply is essential for industrial competitiveness. Governments, in partnership with relevant private sector stakeholders, should accelerate investments in renewable energy, gas infrastructure and regional power integration.”

He went on to urge the expansion of domestic production of fertilizers, petrochemicals, steel, and industrial chemicals which he said will help reduce vulnerability to external supply shocks.

“Efficient transport corridors, ports, and logistics systems are necessary to lower trade costs and improve industrial competitiveness. Finally, we must move beyond lip service and prioritise patronage of locally made products. This will help support and stabilise industrial production amid global pressures,” he said. (Guardian)