Construction cost in Kenya is being backed could decline if prices of key components such as cement are reduced.
According to cement manufacturers, despite construction boom during the pandemic, prices of cement have increased due to import of raw materials such as clinker and logistical challenges that were brought as a result of COVID-19.
Latest data from the Kenya National Bureau of Statistics (KNBS) indicate that construction sector grew 11.8% last year as cement production rose 21.3% last year to reach 7,473,600 tonnes from 6,163,000 tonnes in 2019 as the construction sector bore minimal impact as a result of the pandemic.
On the other hand, price of a tonne of cement increased from Kshs. 12,069 to Kshs. 12,187, a factor being blamed on the higher cost of inputs such as clinker, a key raw material used in cement production.
While higher prices has been driven by logistical challenges in importing clinker during the pandemic, higher cement prices have been attributed to raw material whose import duty is pegged at 10%.
In 2020, Kenya cement clinkers import rose to 2 million tonnes from 1.8 million tonnes the previous year while total value rose from Kshs. 8.4 billion to 8.6 billion which according to Ian Njoroge, a registered enginee with the Engineer’s Board of Kenya could rise further jeopardizing Kenyan quest to grow manufacturing base.
“Cement manufactures are paying 10 percent import duty to bring in nearly two tonnes of clinker annually, while National Cement and Mombasa Cement plants remain underutilized. Several firms have announced plans to expand their clinker capacities by 2023 and this will send production capacity to 10.7 million tonnes, further adding to idle capacity.”
Industry stakeholders have been backing increase of clinker import duty from the current 10% to 25%.
Cement consumption rose significantly from 6.1 million tonnes in 2019 to 7.4 million tonnes in 2020 representing an increase of 20.3%.
During the period, price of a tonne of clinker rose 6.8% to Kshs. 4,619 from Kshs. 4,305.
However Kenya continues to enjoy increase in cement exports which more than doubled to 120,023,500 tonnes last year from 61,658,000 in 2019 as value of exports topped Kshs. 1.1 billion from Kshs. 679 million.
“Cement exports to Uganda and Tanzania declined by 36.6% in 2020, while cement exported to all other countries rose significantly to 108,500,00 thousand tonnes in 2020 from 42,000 tonnes in 2019,” said KNBS in its Economic Survey 2021.
According to Njoroge, clinker imports into the country equals job exports and loss of foreign exchange needed to support the shilling.
“A study commissioned by the Kenya Association of Manufactures (KAM) showed the average landed cost of imported clinker was $100 (Sh11,039) per tonne when landed in Nairobi. The KAM study showed that the factory price for locally produced clinker was ranging between $47 (Sh5,188) and $85 (Sh9,383) per tonne, translating to a saving for cement firms opting for local clinker,” he added.
In 2018, National Simba Cement established a Kshs. 2.8 billion clinker factory in Kajiado County with a capacity to produce 1.2 million tonnes of clinker annually.
When production lines of clinker producers such as Bamburi, East African Portland Cement, Mombasa Cement and National Cement are at a full capacity, Kenya is tipped could see a decline in local clinker cost and imports, ease construction cost and expand jobs as Kenya targets 15% GDP contribution from the manufacturing sector.