Kenya import challenge

Kenya import challenge
Published: 11 December 2003

Faced with high elecricity costs, local cement manufacturers are finding it difficult to compete with Egyptian imports. They have appealed to the government to impose duties on Egyptian imports on grounds that the cost of electricity had pushed their consumer prices 25 per cent higher than international figures. The local cement makers have also been hit by low capacity utilisation rates.

Although the domestic market size is 1.2Mt, the installed capacity for the local companies is 3Mt, which means that the capacity utilisation currently based on domestic demand is 40 per cent.

The current situation is attributable to the the mid 1990's when, buoyed by bullish attitudes and over-optimistic growth projects, the three cement producers invested US$140m both in new plant, and in revamping operations. This projected growth did not come, however, and the manufacturers have recently had to operate in a stagnant market.

The industry is also taxed at 15 per cent on average for most spare-parts used in cement manufacture and certain fuels and in 2000, the cost of power in Kenya was US$74 per MWh compared to US$25.6 per MWh in Egypt. The international average was US$40 per MWh - claim local producers. In the same year, companies operating in Mombasa paid on average 7.43 US cents per Kilowatt-hour, while those in Nairobi paid 6.6 US cents. Power costs have afforded Egyptian producers a major competitive advantage, it is also claimed.

Local Kenyan manufacturers are are lobbying the government to fight to have cement included on the "sensitive product list" under which Kenya can charge duties to cover high energy costs as long as it is less than the top rate. Comesa rules allow for these actions to be taken where satisfactory conditions exist.