Scrap metal dealers demand crackdown on smugglers

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The Kenya Revenue Authority (KRA) is under pressure to crack down on a growing scrap metal smuggling trade, with manufacturers accusing dealers of moving tonnes of scrap to Tanzania and Uganda through key border points.

The manufacturers claim the illegal trade is thriving, with some unscrupulous dealers allegedly operating with little interference as they ferry scrap materials across the borders.

They have also questioned the conduct of some KRA officials stationed at border points, alleging that officials have always watched as the consignments are moved into neighbouring countries.

Peter Wafula, representing battery manufacturers, said the industry was concerned about the alleged smuggling of used lead-acid batteries, which are a valuable source of recyclable material.

Wafula cited an incident in which a truck loaded with scrap batteries was intercepted but later released under circumstances he described as unclear.

He said Holili border in the Taveta area and Busia border were among the border points reportedly being used to move scrap materials out of the country.

The manufacturers want KRA and other enforcement agencies to tighten surveillance along the routes and border crossings, warning that unchecked smuggling could undermine legitimate recycling businesses and lead to the loss of government revenue.

Previously, the battery manufacturing industry warned of an impending production crisis as the rising smuggling of scrap lead-acid batteries to neighbouring countries threatens to cut off the critical raw material needed to sustain local production.

Associated Battery Manufacturers (East Africa) Limited (ABM) stated that its collection of used batteries has declined by about 50 per cent, which puts its operations and thousands of direct and indirect jobs at risk.

The company blamed the sharp decline on the illegal export of scrap batteries, particularly to Tanzania, despite a ban on the export of the raw material through Kenya’s border points.

The industry players have insisted that the illegal trade is undermining the ability of manufacturers to maintain steady production, while depriving the country of raw materials that could support a circular economy and local industrialisation.

In July, a 16 per cent Value Added Tax (VAT) on scrap metal was removed under the Finance Act and a 1.5 per cent withholding tax put in its place, with the National Treasury explaining that this is expected to formalise the trade and raise revenue.

Manufacturers, especially in the field of steel and battery, buy scrap as raw material and when it was under VAT, they could reclaim tax on power, fuel and transport, but the exemption brought challenges for the industry players.

Due to the scarcity of raw materials, products are already about 50 per cent higher, with the local market losing to Tanzania and Uganda.

“The 1.5 per cent replacement tax is weak. Most small collectors have no KRA PIN, so the system often cannot withhold. The government lost 16 per cent and cannot reliably collect 1.5 per cent,” the industry players stated.

At the same time, they claim that the cost of security is increasing as smugglers steal scrap at will while those tasked with addressing the menace are doing very little or colluding with the culprits.

They made reference to the 2015 Scrap Metal Act enacted to address the smuggling menace, particularly for transformers, scrap batteries, copper cables and railway lines and selling them as scrap. VAT invoices required a licence, ID, origin, and a weighbridge ticket.

But with the removal of VAT, they said there are unintended consequences, which include going back to the old ways of doing things.