power rationing set to lay off workers

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Power rationing chocking the Economy

The current drought being experienced in the country last experienced 60 years ago has had adverse effects far much beyond reasonable doubts.

Kenya Power workers in action

Attesting to this the Kenya power company recently announced power rationing program in major parts of industrial estates such as industrial areas. The rationing is for 3 hours for 3 days in some areas and two days in others to realize maximum saving of power.

“There has been power generation shortfalls that have been experienced in the recent past and due to this there is insufficient power generation reserve margin to meet the ever rising national power demand,” said Kenya power managing director Joseph Njoroge.

This means that those working in factories at night should expect job losses or a slash on their salaries and wages. Since most of the casual laborers are paid on hourly basis, the lost hours will represent a considerable amount of revenue.

Two days after the rationing announcement, the Kenya association of manufacturers (KAM) CEO Ms Betty Maina noted with great concern that this is a major blow to the industrialization sector than it had been anticipated.

“Although the KAM Board had been warning its members of this, we hoped that industrial zones would be spared and the assurances of government on anticipated power projects had given us some comfort”.  Ms Betty Maina.

Manufacturers are likely to feel; a heavy pinch as they shift to power generators during rationing hours. Using diesel powered generators bears a risk of significantly increasing production costs and instigating a further rise in the cost of consumer goods.

The rationing schedule is expected to be particularly costly for big industrial pants such as steel mills and other 24 hour operators. The rationing timing is also costly for manufacturers because it comes in the middle of a steady surge in the cost of petroleum products that has seen the price of diesel rise by more than 20 percent to stand at Kshs 105 in Nairobi.

Mabati Rolling Mills MRM, one of Kenya’s top makers of steel and iron products, high production costs risk slowing down the volume of exports.

“Factories need more time to prepare for power rationing , you cannot prepare for a changeover to generators in two days”, said MRM Managing director Kaushik Shah.

The list of manufacturers that will feel the weight of power cut offs include Devki steel mills, , Nation Media printing presses , Mabati rolling Mills, East African Breweries and the small and medium sized enterprises .

The majority of SMEs are expected to revert to scaling down of their operations in response the power shortage because of inability to buy expensive generators and bear the high recurrent costs.

The horticulture industry, which is kenyas third top most earner for forex exchange is also expected to take hit from rationing that is scheduled at the hours when flowers are being chilled for export.

“Our product is exported in the evening and must be cooled by that time,” said Stephen Mbithi the chief executive of Fresh Produce and Exports Association of Kenya (FPEAK)

Mr. Mbithi said most of the members of the association are small scale operators that cannot afford generators and may suffer losses if their consignments are shipped out not well chilled.

Since may, kenyas economy has been hit by natural and man-made shocks in the form of drought and water shortage not to mention the weak Kenyan shilling.

The consumer federation of Kenya (Cofek) expressed concerns that power rationing could see the cost of manufactured goods rise further and cause job losses for thousands of low income industrial works.

“There is the danger of job losses among the low income groups whose employers may not have diesel powered generators,” said Stephen Mutoro secretary general of Cofek

Some analysts expect the growing construction sector to come under severe strain as the costs of inputs such as steel and cement goes up. This will ultimately push the cost of houses further dampening growth that has been under strain in the past two months.

The hotel industry which is in the peak tourism season could also suffer increased energy costs in te use of alternative energy sources to power their cookers.

“it is expensive to run kitchen cookers on generator, the number of ovens in some hotels will have to be reduced,” said Ken Macharia the CEO Kenya Association of Hotel Keepers and Caterers (KAHKC)

Meanwhile, the Kenyan Central Bank has warned that the scheduled power outages announced will curb the growth in east Africa’s biggest economy as it is targeting manufactured firms which will be most affected. It is therefore calling for the Kenya power and the government to take urgent measures by engaging in alternative sources of energy to end the rationing crisis.