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07.04.2007 General News

Energy cost bites industry hard

By myjoyonline

Despite the obvious increase in the cost of production of most local manufacturing companies due to the load shedding exercise, they are scared to increase the prices of their goods to absolve the additional cost.

Prices of goods have remained relatively stable reflecting in the downward movement of inflation although they have recorded significant increases in their cost build up.

The country's largest manufacturer Unilever is spending some 45,000 dollars every month on energy following the power rationing exercise.
While over 200 other companies who rely on Aluworks for raw materials will now have to pay more because Aluworks has to now import its metal following the closure of VALCO. This will be in addition to the extra cost in running generators.

The companies concede that the rational thing to do under the circumstance would be to increase the price of their I goods to cover their cost. But they say they are unable to do so because of fear of out pricing themselves out of the market.

This fear stems from the fact that the market is flooded with cheaper imported substitutes, and consumers may shift to the foreign substitutes should they increase their prices.

To many companies, the viable alternative will be to go back to the drawing board and review their targets for the year.

The companies are also considering cutting down on other costs such as staff emolument, reducing working hours and asking some workers to go on leave in the month of April with the hope that the energy situation will improve by May.

The companies say they are compelled to forgo their profits just to stay in business.

The woes of the local companies could be worsened with the recent increases in petroleum products.

The average increase of 6 percent implies that the already struggling companies will have to pay more on diesel to fuel generators, vehicles and run some of the plants.

Credit: dailyEXPRESS Business