Keep competition in the cement industry fair

Keep competition in the cement industry fair

The proposal to increase import duty on clinker, a raw material used in making cement, from 10 percent to 25 percent, will crush competitors outright.

Devki Group, which owns four cement firms, has been lobbying the government to raise the taxes.

But the reality is Kenya does not produce adequate clinker, for one reason or another, to make cement for the growing construction industry. A higher tax on clinker means lower cement production volumes in the country, at a time that demand is rising.

A boom in real estate and infrastructure construction means that cement consumption is at a historic high and curtailing the ability of other manufacturers to make it will give one entity the monopoly to fix prices.

Cement consumption in Kenya increased by 26.6 percent in the first five months of the year, driven by ongoing infrastructure projects such as the Nairobi Expressway and rising activity in the real estate sector, and it will keep soaring as the economy grows.

If the proposal is passed, rival cement makers are at risk of shutting down and the prices of cement may go up. Also, increasing the current import duties will distort the market, and entrench National Cement’s position as a cement manufacturer and a clinker supplier.

Devki owns National Cement, Simba Cement, ARM Cement, and Cemtech, which control a combined 84 percent of limestone mining allocation.

For Kenyans to enjoy even lower cement prices, the industry needs more players in addition to Bamburi Cement, Savannah, and Rai.

Imposing higher import taxes and forcing companies to buy clinker from few suppliers is retrogressive for an industry that has grown organically over the years.

We cannot be like Nigeria, a country whose protectionist policies dating back to 1999, grew the business empire of Aliko Dangote who went on to become the richest man in Africa.

We need a cement market that offers all players a level playing field and delivers products at the right price to consumers. Therefore, we support the Competition Authority of Kenya (CAK) in rejecting the push to increase the clinker tax.

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