Cement and steel makers warn against export, investment levy
Manufacturers have warned that Kenya risks losing investments worth $1 billion (Sh130 billion) in the cement, steel and paper industries if Parliament approves proposals by the National Treasury to impose a 10 per cent export and investment levy.
This, they said, will impact negatively on President William Ruto’s grand plans to deliver 250,000 affordable houses to thousands of low-income earners annually.
The players in the cement and steel industry want Parliament to remove the 10 per cent export and investments levy on clinker, steel and packaging materials from the Finance Bill, 2023.
The Kenya Association of Manufacturers (KAM) and the Kenya Private Sector Alliance (Kepsa) told MPs that cement and steel industry manufacturers are planning to close shop and relocate to Tanzania and Uganda where taxation is lower than in Kenya.
“The levy will promote investment in the Comesa countries which are Kenya's close competitors. There will be flight by multinational companies,” KAM chief executive officer Antony Mwangi told MPs.
He said out of the seven cement companies in Kenya, three have clinker production lines while the other three are developing their capacity to produce clinker. The remaining one has no capacity completely.
He asked the National Assembly’s Finance and National Planning Committee, which is receiving public views on the Finance Bill, 2023, to delete and postpone the export and investment levy for four years to enable the four cement firms to develop their clinker production lines for the manufacture of the cement ingredient locally.
Mr Julius Induswe, the chairman of the cement subsector at KAM and an employee of Savanah Cement, said three cement companies import 100 per cent of clinker while one is struggling.
“The desire of the new government to have affordable housing will not be achieved because the 10 per cent levy will impact the ex-factory price of cement pushing prices upwards from the current Sh540 per 50kg bag to more than Sh700 with the difference passed to the common man.”
Mr Kotni Rao, the chairman of Blue Nile Rolling Mills, said the export levy imposed on steel will result in the closure of his Thika-based factory which paid Sh1 billion in taxes in 2022. He said the cost of producing galvanised iron wire in Kenya is Sh145 and imposing a 10 duty will see the price shoot to Sh177 compared to Tanzania and Uganda prices of Sh135, Egypt (Sh145), South Africa (Sh161) and China (Sh154). Kimani Kirore, the managing director of East African Packaging Industries, said the levy will impact exports of packaging materials.
“We do 40 per cent exports of packaging products to EAC. We manufacture packaging bags for Kenya Tea Development Authority (KTDA) for export of all Kenyan tea, fresh produce exports such as cut flowers and avocado,” he said. “Imposing the export tax will shut down the three local manufacturers of these packaging materials in favour of packaging bags from Sri Lanka.”