Devki boss Narendra Raval: How Kenya can shed the tag of a net importer

Kenya`s journey towards vision 2030 is anchored on the foundations of economic, social and political pillars.

Under the economic pillar, industrialisation features prominently and is touted as one of the sectors that will catapult Kenya into middle-income status.

But amid the hype, questions remain as to whether the economic blueprint is enough to transform the country into a net exporter. 

Industrialist and Devki Group of Companies founder Narendra Raval reckons that achieving Vision 2030 may be a tall order under the current regulatory environment.

A shrewd deal-maker with an estate valued at Sh75.7 billion, according to Forbes Magazine, Mr Raval says the policies are not supportive enough to boost the country’s industrialisation.

“We need water-tight policies in place, which should be implemented. Big industries have to be protected by the government through proper policies,” he told Ktn Business in a recent interview.

Devki Group - the country’s biggest steelmaker is now also the largest cement manufacturer. Mr Raval, better known as Guru, who paid Sh5 billion for the acquisition of Athi River Mining (ARM), has set his sights on winning the war for the control of cement billions.

Devki’s portfolio includes Devki Steel Mills, National Cement Company (makers of Simba cement), aviation services provider Northwood Agencies and Maisha Packaging.

He is particularly keen on getting his hands on some Sh8.3 billion that cement manufacturers without clinker plants paid annually for the importation of clinker — a key ingredient used in the production of cement.

Devki Steel Mills has pumped Sh27 billion into a plant in Kwale, which uses locally sourced iron ore, with some addition from Uganda and South Africa, to produce wire rods and billets.

Despite having the local capacity, Kenya imports about 20,000 tonnes of wire rods a month worth over $250 million (Sh30 billion) annually, which Mr Raval blames on the failure of local laws in protecting manufacturers.

He also blames the Kenya Association of Manufacturers (KAM), a manufacturers’ lobby, for being “part of the problem.”

“We have had a bad experience with KAM for misguiding the Ministry of Industrialisation on key issues. For instance, we have been asking for a duty to be imposed on imported wire rods, billet, ferrosilicon and manganese, which are produced locally. Now for a whole year, they have not placed the duty to protect the local producers,” says Mr Raval.

Import duty

He also had run-ins with the lobby over the duty on imported clinker.

In the 2019/20 financial year, during a Budget-making roundtable among KAM members, Mr Raval’s National Cement proposed increased import duty on clinker from 10 per cent to 25 per cent, citing sufficient local capacity to supply the input.

However, the proposal was turned down by KAM’s Trade and Tax Committee, which found that the prevailing rate was adequate and appropriate.

The committee noted that there was a need for the sector to adequately invest in clinker production to meet the shortfall that is imported before a higher duty could be considered.

And in the following Budget cycle, National Cement and Mombasa Cement came back with the same proposal, a move that saw the KAM cement sub-sector direct the secretariat to constitute a National Independent Clinker Verification Committee to look into clinker production and consumption in Kenya.

The committee, which drew its membership from the Trade and Industrialisation Ministry, Kenya Bureau of Standards, Treasury, Ministry of Petroleum and Mining, a representative for grinders (Bamburi Cement) and another one for clinker manufacturers (East African Portland) returned the same verdict after five months.

Installed capacity

The committee’s findings were that there are seven cement manufacturers in the country with a combined installed capacity of 14 million tonnes.

They have a grinding capacity of 65 per cent. Four firms — Mombasa Cement, National Cement, EAPC and Bamburi Cement — have clinker production plants with a combined annual capacity to produce about eight million tonnes.

Mr Raval claims KAM has a lot of bureaucracy and seeks to protect importers at the expense of local producers.

He says his industry can produce three times what the country needs, yet importers are given priority.

“If anything is produced locally, there should be a duty on imported material. It is a simple method that KAM should suggest. Instead, they are asking for zero duty on imports,” laments Mr Raval.

“This means they want to drive the economy towards being net importers, causing foreign exchange constraints and exportation of jobs.”

He also takes issue with the common external tariff (CET) imposed by the East African Community (EAC) at a maximum rate of 35 per cent on products classified under the fourth band of the EAC common external tariff.

The commodities in this band include iron and steel, dairy and meat products, soaps, beverages, edible oils and cotton and textile.