KENYA: Cement prices hiked on new mining levy

Cement makers have increased prices of the key construction commodity in the wake of a new mining levy imposed by the Ministry of Mining.

The move wrecks hopes of lower house prices on new buildings as it rolls back the relief handed to future homebuyers by manufacturers when they slashed prices in October.

Ex-factory prices – those at which wholesalers buy from manufacturers at the factory – were hiked by up to five per cent on Monday; meaning the increase at retail outlets will be even higher when delivery costs and other charges are factored in.

Najib Balala, the Cabinet Secretary for Mining, gazetted a Sh140 per tonne mining levy on cement on December 18, overriding an earlier notice pegging the levy at one per cent of the turnover. The new levy translates to Sh7 per 50kg bag.

“This is totally unfair and nowhere in the world do governments use such unfair strategies. It is the poor wananchi who will bear the brunt as the cost will be passed on to them,” said Narendra Raval, chairman and CEO of Devki Group.

“We effected a new price on Sunday midnight. The levy is unnecessary and illegal and should not be on cement because some cement makers are not even mining anything here.”

Raval said the levy will discourage people from building houses and in return spur rapid growth of shanties, but manufacturers “have no choice”.

National Cement, a member of the Devki Group and maker of Simba Cement, has increased its ex-factory prices from Sh600 to Sh625 per 50kg bag. It had reviewed its price down on October 1.

“We have increased by Sh25, taking into account the Sh7 levy, VAT (16 per cent) and power charges of Sh4-5 per unit on the power tariffs that are the highest ever,” he said.

Bamburi Cement has reviewed its ex-factory prices upward. Its corporate affairs manager Susan Maingi was unavailable to comment on it new pricing.

“We have definitely reviewed the prices but I do not have the specific details,” said Fidelis Sakwa, Bamburi’s product development manager.

Athi River Mining, maker of Rhino Cement, said it has not adjusted its prices but is conducting a review of costs to inform its stance.

“We have not reviewed prices so far but the levy has definitely pushed up costs. We are looking at our cost structure to see where we can improve efficiency to reduce costs and avoid raising prices,” said Surendra Bhatia, the deputy managing director.

“We are fairly priced and we prospect to always find some cost efficiencies,” he said, adding that its ex-factory prices differ based on its different markets.

Phone calls to Kephar Tande, the East African Portland Cement Company managing director, to establish the firm’s position on the new levy went unanswered.

The rise in cement prices will impact on the overall cost of construction, which was hoped to otherwise head downward after makers of key commodities such as cement and steel bars slashed prices in October.

Most affected will be self-builders who rely on incremental construction models as they lack funds to out-rightly buy building materials in bulk. Cement prices have remained stable over the past five years, retailing at between Sh650 and Sh750 per bag.

Real estate analysts had hoped new-builds released in the market from October this year would have been cheaper, factoring in the price cuts in the fourth quarter 2013.