Kenya must have lower energy costs to help drive growth of the manufacturing sector, President William Ruto has said, pointing to a possible revisit of the Independent Power Producers (IPPs).
This comes as the Kenya Kwanza administration lays ground to start delivering some of its campaign promises, among them being supporting new and existing investors in the country’s industrial sector.
This is for growth and job creation, where local manufacturers are keen to increase the sector’s contribution to the GDP to 20 per cent in the next eight year, from the current seven per cent.
"The cost of production must also be lowered significantly through lower energy and input costs, and a more supportive tax regime,” President Ruto said.
He spoke yesterday during a Micro, Small and Medium Enterprises (MSMEs) forum organised by the Kenya National Chamber of Commerce and Industry, in Nairobi.
Lowering the cost of power means the energy ministry will have to re-look into the IPPs, where some are selling electricity up to 35 times more than the cheapest generator—KenGen.
The country’s biggest power generator has invested heavily in geothermal, offering electricity to Kenya Power at a wholesale price of about Sh7 per kilowatt hour (kWh).
An effort to review expensive Power Purchase Agreements between Kenyan Power and the IPPs during former President Uhuru Kenyatta’s tenure faced hurdles, frustrating the government’s efforts to cut power bills by at least 30 per cen
This has left consumers grappling with high bills mainly driven by the Fuel Energy Charge.
The consumer Federation of Kenya (Cofek) expects the government to review contacts with the IPPs, and taxes on power bills, to bring down the cost.
According to the Kenya Association of Manufacturers (KAM), industries have been negatively impacted by the high costs of power, which increases the cost of production.
“We urge the government to suspend some of the taxes on fuel as an alternative mechanism to shield the country from the high cost of fuel,” KAM told the Star.
High energy costs compared to neighbouring Ethiopia and Egypt have been some of the major concerns by local players, who say it is making Kenyan goods expensive, when production costs are factored in.
The cost of electricity in Ethiopia for example is at a low of $0.03 (Sh3.65)per kWh, Egypt $0.06(Sh7.30) and South Africa $0.09 (Sh10.96).
In Uganda, manufacturers pay $0.10 (Sh12.18)per kWh.
Their Kenyan counterparts are paying an average of Sh16 per kilowatt.
In October,Kenya signed a 25-year deal with Ethiopia for electricity imports at an average Sh6.5 per kilowatt, expected to edge out expensive power from the national grid.
