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Cement manufacturers escalate dispute over clinker import tax

BUSINESS
By Macharia Kamau | October 6th 2021

Bamburi Cement Ltd Trucks collects cement from a Silo, a storage facility in Industrial area, Nairobi on May 24, 2021. [Stafford Ondego, Standard]

A section of cement manufacturers has reacted sharply to plans by National Cement to lay off workers at its clinker production plant, claiming the firm was playing politics in a bid to get the government to increase import duty on clinker.

National Cement, a subsidiary of Devki Group, announced on Saturday that it was laying off workers at its factory in Kajiado County, citing poor demand for the essential raw material in cement production.

Devki Chairman Narendra Raval said the company would send home at least 860 employees working at its Emali-based clinker production plant as demand had failed to pick, with local cement firms preferring to import clinker.

This would come after 300 employees were laid off after the firm shut its clinker facility in Mombasa.

Mr Raval has in the past pushed for a hike of import duty on clinker to 25 per cent from the current 10 per cent, saying the country has adequate production capacity.

However, major competitors Bamburi, Rai, Savannah and Ndovu Cement faulted the firm, saying the clinker issue was being addressed through a “collaborative initiative” that National Cement is part of.

They said the firm was being “disingenuous” on an industry-wide issue that key stakeholders have engaged on.

"I do not see why National Cement is playing politics with such a sensitive long-term industry issue that has taken  over a year and which involved the entire cement industry and key stakeholders, including National Cement," said Savannah Cement Chairman Benson Ndeta in a joint statement on Monday.

He added that Devki was attempting to strong-arm the government into imposing higher taxes on imports, a move that would “serve one player's personal interests and expectations”. 

Local cement firms have been fighting over whether to increase import duty on clinker, with National Cement and Mombasa Cement championing a tax increase while the four others have opposed it.

This led the industry to set up a committee, together with Kenya Association of Manufacturers and the ministries of Industrialisation, Petroleum and Mining and National Treasury, to look into clinker production and consumption.

The committee, which gave its report mid-September, recommended that the industry be given a four-year window to increase its clinker production capacity, after which the State can increase duty on imports.

The cement firms noted that National Cement was part of the discussions.

“I am surprised by the statements being made by one of the players who participated in a detailed independent  study for the industry,” said Bamburi Cement Managing Director Seddiq Hassani. 

The committee on clinker noted that 40 per cent (1.5 million tonnes) of clinker is imported, of which 60 per cent originates from Egypt at zero-tariff rate.

It also found that locally-produced clinker is currently 15-30 per cent cheaper than imported clinker. 

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