Virus still a threat to paints market in Kenya: Expert

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The coronavirus pandemic continues to have devastating effects on key markets in the Kenyan economy, among them paints and coatings.

This is according to Crown Paints Group Chief Executive Officer Dr. Rakesh Rao who has attributed the high cost of raw material in the paint industry to continued impact of virus.

The CEO said the situation remains worrying, particularly, on how it has impacted on the cost of raw materials, both on price of materials and loss of time due to worldwide logistical inefficiencies.

Dr. Rao said raw materials costs had increased by between 40-60 percent and warned that should the situation continue, the construction sector’s overall performance would be negatively affected.

“We remain cautious due to the continued lockdowns in the country. For instance, partial lockdown in Kisumu County, one of our strongest markets, has adversely affected our sales”, Dr. Rao explained.

To deal with the changed brought forth by the virus, Rao said the company had resulted in changing its marketing strategy, by focusing on products targeting people working from home.

This, he said, saw an increase in premium products as the demand for home decoration and construction products went up.

Crown Paints eyes the construction sector for growth

“As we gear towards the forthcoming general elections coupled with the ongoing pandemic there’s a bigger risk that the economy may not recover sufficiently, and this is a concern among industry players. We will however, continue to focus on innovative products and digital marketing to boost our market share”, Dr. Rao added.

Kenya’s overall inflation rate last year averaged at 5.3 percent compared to 5.2 percent in the previous year.

This was attributed to the effects of the pandemic, which saw the vibrant service sector for instance perform dismally on account of lockdowns and business closures. The net effect was that the cost of doing business went up significantly.

On the regional front, the CEO said the same dynamics were experienced in Ugandan whose economy slowed down in growth due to the impact of COVID-19. Additionally, agriculture which is Uganda’s mainstay suffered as a result of locust invasion and flooding.

The Group’s turnover for the year ended 31 December 2020 grew by 7 percent (Sh588 million) to Sh9 billion in comparison with year 2019 which had a 3 percent (Sh288 million) increase against the year 2018.

Similarly, the operating profit before tax, for year ended 31 December 2020 rose by 63 percent (Sh335 million).

This comes even as a new report by Mordor Intelligence estimates that the Middle-East and Africa paints and coatings market will witness a significant growth, at an estimated CAGR of over 3 percent between 2021 and 2026.

The report states that a major factor driving the market studied is the increased focus on tourism and construction in the Middle Eastern region.

However, COVID-19 Outbreak is likely to have a negative impact on the market for short to medium term.

Plans for New Luxury Real Estate Projects in Qatar are likely to act as an opportunity for the market studied.

Dr. Rao said raw materials costs had increased by between 40-60 percent /COURTESY

A Look at the Sector

A report by Deloitte released last month indicated that Kenya’s construction sector experienced a year-on-year growth of 7.8 percent on average over the last 5 years, but is estimated to have slowed down to 1.3 percent real growth in 2020 as the COVID-19 pandemic ravaged through the sector’s activity.

The report also reveals that residential and commercial construction sub-sectors were worst affected while public infrastructure construction sub-sector strived to maintain growth momentum, supported by public spending.

Key impediments witnessed in 2020 included supply bottlenecks, reduction in labour and constrains on financing.

In Uganda, Deloitte estimates that the country’s GDP contracted by 1.1 percent in 2020 m0ainly due to a sharp decline in tourism and the effect of the regional locust outbreak on agriculture.

Crown Paints worry over production as profit dips 32% to Ksh40M

The country’s GDP growth is projected at 3.7 percent in 2021 driven by a 2.8 percent growth in agriculture as global demand for coffee rises, a 5 percent growth in industry owing to a resumption of infrastructure projects and a 3.5 percent growth in services supported by growing regional trade.

“However, the country’s 42-day lockdown that ended on 30 July 2021 may deter the country from achieving the 3.7 percent forecasted growth in 2021,” the report notes.

Wanjiku Njuguna is a Kenyan-based business reporter with experience of more than eight years.

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