Kenya/Tanzania: ministers push for protection of cement market

Kenya/Tanzania: ministers push for protection of cement market
20 May 2010

Kenya and Tanzania want cement returned to the region’s list of protected commodities before the common market comes into force in July to cushion local producers from cheap imports.

Treatment of cement in the region is set to feature prominently when the council of ministers holds its next sitting just days before region’s heads of state summit in Arusha at the end of the month.
The push is likely to anger the landlocked countries that have been fighting for easier importation of building materials to lower construction costs.

Kenya and Tanzania are pushing for imposition of 35 per cent tariff on imported cement while Uganda, Rwanda and Burundi, which rely on the expensive road network to get the product from neighbours want all barriers to be eliminated.

“Given huge investment in the sector and the fact that we are jointly promoting industrialisation in the region the council of ministers will protect cement,” Kenya’s EAC PS David Nalo said.

It is estimated that on average, imported cement retails in both Kenya and Tanzania at KES702/50kg bag compared to locally manufactured cement which sells at KES954.

For landlocked countries, the retail price is adjusted upwards to include the transport component depending on the distance.

Fresh campaigns to protect cement industry comes amid growing complaints from the private producers in both Kenya and Tanzania that cheap cement has swamped the domestic market, forcing some of them to suspend operations.

On Tuesday, the East African Cement Producers Association (EACPA) chairman David Njoroge maintained that EAC’s production capacity of 9.83Mta, is 2.73Mt above the domestic demand.

“There is no production deficit to warrant imports. We are undertaking capacity installation to ensure that by 2013 the region’s production capacity will be 12.7Mt against a projected consumption of 8.7Mt,” said Mr Njoroge.

EACPA says high energy and transport costs have made local production uncompetitive.

Compared to low-cost countries in Asia and Middle East, cement producers in the EAC pay between three to five times for energy while transport costs are four times higher.

Mr Njoroge said the average electricity cost for EAC is 15 US cents per KWh compared to three US cents per KWh in China, Egypt or Pakistan.

“We also pay US12 cents per tonne per km for transport compared to three US cents in Asian countries and Egypt,” said Mr Njoroge.

In Tanzania, officials said local producers have the capacity to produce 1.8Mt against a domestic consumption of 1.9Mt.

The region’s Customs Union Management Act compels all the five EAC members to extend similar treatment to all imports.

On Tuesday, Kenyan officials were confident that ministers from the landlocked countries will support the new measures to protect cement firms.

At the region’s Extra-Ordinary Meeting for Finance ministers late last year, Uganda’s Syda Mbumba led his Rwandan and Burundian counterparts in asking for a reduction of Common External Tariff (CET) on cement “to mitigate the effects of high inputs prices on the construction sector.”

False impression
Kenyan officials said deficit was caused by huge infrastructure projects like Athi River-Arusha Road, expansion of Kisumu and JKIA airports, and the then booming construction sector.

“All these projects, undertaken concurrently created a false impression that local producers did not have the capacity to satisfy domestic demand, prompting the council of ministers to lower tariffs,” said Mr Nalo.

Published under Cement News