Steel-maker Devki Steel Mills up for major win in proposed taxation regime

President William Ruto (second left) with First Lady Rachael Ruto during the official opening of Devki Steel Mill Plant in Samburu, Kwale County.

Photo credit: Kevin Odit | Nation Media Group

Steel manufacturer Devki Steel Mills is set to benefit from the proposed taxation framework by the Ministry of Investments, Trade and Industry on materials brought into the country for manufacturing.

The framework will give Devki Steel Mills, a local manufacturer that has opened a Sh50 billion raw steel production factory in Kwale County, a grace period to be provided for in the law as its competitors pay the tax.

The Kwale plant, recently inaugurated by President William Ruto, has the capacity to produce at least one million tonnes of steel annually. This comes as the government haggles over the rate to be charged for the imported raw materials for steel, paper and furniture.

Although the Kenya Association of Manufacturers (KAM) is pushing for a 10 per cent levy on imported raw materials, Investments, Trade and Industry Cabinet Secretary Moses Kuria says that the rate is “quite” low.

“The government hasn’t come up with the rate yet but they (KAM) are already proposing 10 per cent. It’s a good thing and though I like the idea, I would want the levy to be at 30 per cent on the imported materials,” Mr Kuria said.

The CS noted that the proceeds from the levies will go towards supporting exports and investments by the government in strategic areas like renewable energy, information and communication technology, local production of electric vehicles, and opening of export warehouses among others.

“Once the consultations that we are having with industry players are done, the government will gazette the framework for the levy whose implementation will be progressive and will range from one product to the other,” said Mr Kuria.

KAM Chief Executive Officer Anthony Mwangi wrote to Industry Principal Secretary Juma Mukhwana on January 10 proposing a 10 per cent levy on billets that are used as raw materials in metal processing operations.

KAM wants the levy charged as of April 1 pending the fulfilment of certain conditionalities. But after a meeting with CS Kuria last week, KAM sought to have the effective date pushed further to July 1, 2023, despite Mr Kuria holding up to the April date.

EAC states

Among the conditions that KAM wants fulfilled is that no other tax should be reintroduced on top of the proposed levy, which it says should apply to all the East African Community (EAC) member states.

This is so as not to make Kenya a dumping ground for cheap products from the neighbouring countries. KAM’s fears are that Devki Steel Mills will operate under a monopolistic regime despite concerns from the industry players about the manufacturer’s capacity to serve EAC which has over 270 million people.

“Currently, the industry has serious concerns regarding the proposed manufacturer’s capacity to satisfy the region’s demand for billets as well as wire rods. It is important to note that the manufacturer has the same facility to produce both products,” the KAM boss says.

Industry players have also urged the government to undertake impact assessments around the world on the new levy. They also say that, should it be operationalised, it should be in phases “so as to ensure that there is no crisis in the availability of finished products in the market.”