The cost of construction in Kenya is sustained could drop if the prices of key components such as cement are reduced.
According to cement manufacturers, despite the construction boom during the pandemic, cement prices have increased due to the import of raw materials such as clinker and logistical challenges related to COVID-19.
The latest data from the Kenya National Bureau of Statistics (KNBS) shows that the construction sector grew 11.8% last year, with cement production rising 21.3% last year to 7 473,600 tonnes compared to 6,163,000 tonnes in 2019, the construction sector having suffered minimal impact due to the pandemic.
On the other hand, the price of a ton of cement has increased by Kshs. 12,069 in Kshs. 12,187, a factor attributed to the higher cost of inputs such as clinker, a key raw material used in the production of cement.
While the rise in prices was due to logistical problems related to the importation of clinker during the pandemic, the rise in cement prices was attributed to the raw material whose import tariffs are set at 10%.
In 2020, Kenya’s cement clinker imports reached 2 million tonnes from 1.8 million tonnes the previous year, while the total value increased from Kshs. 8.4 billion to 8.6 billion which, according to Ian Njoroge, an engineer registered with the Engineer’s Board of Kenya, could rise further, further undermining Kenya’s quest to expand its manufacturing base.
“Cement makers pay 10 percent import duties to bring in nearly two tonnes of clinker per year, while the National Cement and Mombasa Cement factories remain underutilized. Several companies have announced plans to expand their clinker capacities by 2023, which will bring production capacity to 10.7 million tonnes, further increasing spare capacity. ”
Industry stakeholders have supported increasing clinker import tariffs from 10% to 25% currently.
Cement consumption increased sharply, from 6.1 million tonnes in 2019 to 7.4 million tonnes in 2020, an increase of 20.3%.
During the period, the price per ton of clinker increased by 6.8% in Kshs. 4,619 of Kshs. 4,305.
However, Kenya continues to benefit from an increase in cement exports which more than doubled to 120,023,500 tonnes last year from 61,658,000 in 2019 as the value of exports exceeded Kshs. 1.1 billion Kshs. 679 million.
“Cement exports to Uganda and Tanzania decreased by 36.6% in 2020, while cement exported to all other countries increased significantly to reach 108,500,000 tonnes in 2020 from 42,000 tonnes in 2019 ”, KNBS said in its 2021 economic survey.
According to Njoroge, imports of clinker into the country are equivalent to the exports of jobs and the loss of foreign exchange needed to support the shilling.
“A study commissioned by the Kenya Association of Manufactures (KAM) showed that the average landed cost of imported clinker was Sh $ 100 (11,039) per ton when landed in Nairobi. The KAM study showed that the factory price for locally produced clinker was between $ 47 (5,188 shillings) and $ 85 (9,383 shillings) per tonne, resulting in savings for cement plants switching to local clinker. “, he added.
In 2018, National Simba Cement created a Kshs. 2.8 billion clinker plant in Kajiado County with a production capacity of 1.2 million tonnes of clinker per year.
When the production lines of clinker producers such as Bamburi, East African Portland Cement, Mombasa Cement and National Cement are at full capacity, Kenya could see lower costs and lower local clinker imports, reduce construction costs and expand. jobs as Kenya targets 15% of the manufacturing sector’s contribution to GDP.