Cement manufacturers are lobbying the government to reduce electricity tariffs and high taxation on raw materials in an effort to cut operating costs, which they say are eating into their profit margins.
Kenya’s energy costs are considered the highest in the East African Community and Bamburi Cement say this, coupled with high costs of transport and other expenses is hurting its operations.
“So far it is still very high in Kenya, this is one of the area where as an industry and not just cement but also steel and auto industries will need this kind of support from authorities to reduce production costs,” said the managing director of Bamburi Cement, Seddiq Hassani in an exclusive interview with this writer.
In August 2019, the cement maker announced a marginal dint in its operating profit from Sh1.2bn in 2018 to Sh0.3bn last year, with the drop being blamed on higher energy and logistics costs fueled by higher power tariffs and increase in fuel prices over the same period last year.
Mr. Hassani says the company spend up to Sh3billion annually on power costs to Kenyan Power, the country’s sole electricity distributor.
The price of electricity is US$ 0.220 per kWh for households and US$ 0.189 for businesses which includes all components of the electricity bill such as the cost of power, distribution and taxes – compared to average price of electricity in the world as of June last year was US$0.14.
“I do not have exact numbers but I believe we paid between Sh2billion and Sh3billion last year on electricity cost alone,” said Hassani, adding that the company officials are planning a meeting with energy distributors to try and persuade them to revise the tariff downwards, believing such a move will also make the affordable housing a reality.
“We also believe that exemptions of taxes on all products related to affordable housing will improve the sector,” he says revealing that engagements with relevant government agencies such as the National Treasury and Kenya Revenue Authority (KRA) as well as utility firms were on going to relook at the impacts of high electricity costs being passed to other industries like steel manufactures and auto makers.
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