Building a house has become expensive after a spike in prices of cement due to depressed supply of clinker, a critical raw material for making cement.
Prices of some cement brands have nearly doubled since last year, with manufacturers struggling to access clinker whose prices shot up after the government introduced an export promotion levy of 17.5 per cent.
The levy, which was introduced in the Finance Act 2023, and which has since been challenged in court by the Kenya Association of Manufacturers (KAM), was aimed at promoting local production.
Ex-factory price for a bag of cement is going for as high as Sh1,000 in western Kenya from as low as Sh550 in the same period last year, making it expensive to build a house.
Expensive cement prices will impact infrastructure projects such as roads and dams which need a lot of the product.
For most cement brands, prices range between Sh600 and Sh800, pushing up the cost of construction.
Kenneth Kinyua, who has been building in Kiambu County, said last December they were buying a bag of cement at around Sh650 in local hardware shops.
“Now, cement is Sh800 as of yesterday at the hardware store. And those are hardwares around here in Kiambu, Kamakis and other areas,” said Kinyua.
Raw material
“The prices seem to be going up every weekend. From December to date, like every weekend, prices keep rising by Sh20,” added Kinyua.
A cement manufacturer, who spoke to us on condition of anonymity, attributed this to the under-supply of clinker. “The major challenge is in terms of procurement of the raw material in cement which is clinker,” said the source.
“And what happened is when the proposal to increase the duty on clinker, it was said there is local capacity to supply the local market adequately, but when you go to buy you are told that even them (clinker producers) do not have enough for themselves,” said the source.
Clinker is to cement what unga is to ugali, and its production, or lack of it, impacts cement production. Clinker, a dark grey substance, is produced from limestone.
Billionaire Narendra Raval Guru, through his company National Cement, has nearly 80 per cent of the limestone mining licences which means, by extension, he has a stranglehold on the lucrative clinker market.
Cement manufacturers without clinker plants of their own are having difficulties accessing this raw material.
The shortage has also resulted in an increase in the price of clinker and thus the cost of producing cement.
Locally produced clinker, players in the industry have said, used to cost $50 per tonne. But now it has shot up to $130. While the high cost of clinker is a major boon for its producers such as National Cement, it hurts consumers who are buying cement at a high price.
More expensive
Imported clinkers are even more expensive. To bring in a tonne of clinker before the levy a cement manufacturer paid $100 a tonne, but this has shot up to around $150 making it nearly inaccessible.
The high prices of clinker have also been aggravated by the decision by a major manufacturer to stop importing it following the introduction of the levy.
High prices of cement will negatively impact President William Ruto’s affordable housing programme in which the Kenya Kwanza administration intends to build 200,000 low-cost houses every year.
Guru was a major beneficiary of the government’s decision to introduce a 17.5 per cent export and investment promotion levy on imported clinker in what was aimed at promoting local production.
However, KAM has moved to court to challenge the introduction of the levy, saying it will negatively affect their business.
The levy also applied on imported goods such as steel and clinker.
KAM's position contrasts with that of Guru who backs the levy and whose steel and cement operations are set to benefit from the introduction of the fee.
KAM is asking the High Court to declare the levy unconstitutional, citing lack of public participation, discrimination, failure by the National Treasury to set up the fund, and poor quality of locally available raw materials as some of the reasons they were opposed to the levy.
According to KAM, the levy will not achieve its intended goal of boosting local production and exports.
