TAXATION

Cement firms seek Treasury meeting over clinker imports

Cement firms in battle with KAM over proposed clinker import tariffs

In Summary
  • KAM argues that the move will promote the manufacturing sector and create jobs. Only National cement and Mombasa cement produce their own clinker while the rest import.
  • Hassan said that a tariff rise at this time risks distorting the market and setting the stage for unfair competition. 
Bamburi Cement Group Managing Director Seddiq Hassani, Covid -19 Emergency Fund , fundraising Chairperson Jermy Awori and the Fund's Chairperson Jane Karuku during the cheque handover ceremony at the Covid -19 Emergency Board offices at KICC./
Bamburi Cement Group Managing Director Seddiq Hassani, Covid -19 Emergency Fund , fundraising Chairperson Jermy Awori and the Fund's Chairperson Jane Karuku during the cheque handover ceremony at the Covid -19 Emergency Board offices at KICC./
Image: COURTESY

Four cement manufacturers have requested for an urgent meeting with the national treasury over a proposal to review the Common External Tariff (CET) on imported clinker upwards or total ban.

Bamburi , Savannah, Ndovu, and Rai Cement factories have written to National Treasury principal secretary Julius Muia stating their position to the proposal by the Kenya Association of Manufacturers (KAM)  saying it would lead to unfair competition and destroy investments.

"On behalf of Bamburi Cement and my colleagues in Savannah Cement, Ndovu Cement and Rai Cement, we're seeking an urgent meeting with your esteemed office at your earliest convenience your schedule permitting," said Bamburi MD Seddiq Hassani who signed the letter dated March 25.

The Kenya Association of Manufacturers has proposed that CET on imported clinker be reviewed from the current 10 percent to 25 percent on imported clinker or a complete ban of importation to protect local manufacturers.

KMA argues that the move will promote the manufacturing sector and create jobs.

Currently only National Cement and Mombasa Cement produce their own clinker while the rest import.

"Our joint position is that while we believe that in the long term this is the right direction in order to safeguard local manufacturing, we are opposed to this upward review at this point in time, " Hassani.

He said that the four companies should be given a window of between 4 and 5 years to set up their own clinker facilities as this will provide a predictable policy framework for all investors rather than to increase CET for imported clinker.

"We are currently at various stages in the investment process of additional facilities and are committed to ensuring that we are clinker sufficient within this time-frame," he said.

Hassan said that a tariff rise at this time risks distorting the market and setting the stage for unfair competition. 

He said that the move to increase CET on imported clinker will result in significant damage to investments in the cement sector over the last few years and resultant loss of revenue taxes and jobs.

The companies argue that there is no compelling reasons for the proposed tariff action to be taken at this point in time as there is no risk for other cement players.  

The letter says that globally, clinker process, though fluctuating is higher than the cost of locally manufactured clinker.

"With competitive pricing, correct quality and quantity, the local manufacturers are well placed to compete effectively. We wish to reiterate that we all support the government position of buy Kenya build Kenya, " the letter reads.

The letter is copied to John Simba (chairman Bamburi Cement), Benson Ndeta (chairman Savannah Cement), Kishor Varsani (Managing director Ndovu Cement) and Sarbjit Singh Rai (Managing director Rai Cement).

Lugari MP Ayub Savula has filed a question in the National Assembly seeking clarification from Treasury Cabinet Secretary Ukur Yatani on the progress in regard to the proposal by KAM to review CET or ban on importation of clinker.

"The tax review is necessitated by the fact that Kenyan companies have the capacity to produce the clinker to supply the local market to spur growth of the economy and enhance manufacturing to create jobs," Savula said.

He also wants to know what other mitigation factors the CS has put in place to curb resistance from four companies manufacturing cement which are supposed to adhere to the proposed tax review.