Kenya’s steel makers lobby for zero rated fees to boost sector

Over 50 stakeholders in the steel sector have called upon the government to zero rate fees in a bid to boost the industry.

The stakeholders who converged for the first ever International Steel Forum in Kenya said that local steel industry is heavily dependent on imported raw materials.

The forum saw the stakeholders sourced from all over the world meet and focus on providing partnership opportunities to boost the sector’s competitiveness and developing frameworks of collaboration to better shape the future of the industry.

Speaking at the event, the Kenya Association of Manufacturers (KAM) Chair Mr Sachen Gudka noted that the local Steel sector has grown over the years, adding that the establishment of stronger partnerships with global investors, would be vital to attain the desired growth in the sector and the economy.

“The future of the sector looks at the development of Smart Infrastructure. Through data and employment of sustainable strategies the sector will spur the productivity of the country and the continent for the next generation.

We are at the juncture where our trade deficit continues to widen as a country, and the numbers in Steel are a clear demonstration of that. If we can forge stronger partnerships, with our global stakeholders finding opportunities to continually invest in Kenya, surely we can turn this around in a short amount of time,” said Mr Gudka.

He further stated that the realization of the targets set out under the Manufacturing and Affordable Housing pillars of the government’s Big 4 Agenda will require a significant input from the iron and steel sector, as it presents opportunities for growth.

According to data from the Ministry of Industrialisation, direct and indirect consumption of steel in Kenya is projected to increase as the country embarks on the development activities as envisioned in the Vision 2030.The major Vision 2030 projects include Lamu port development, railway and roads projects, housing, Industrial parks and the development of the special economic zones all of which utilize steel products. The Iron and Steel industry in Kenya forms about 13 percent of the manufacturing sector, which in turn contributes significantly to the GDP.

The local steel industry is heavily dependent on imported raw materials, as no local sources have been developed to date. The local deposits of iron ore and coal, which are the raw materials for the production of iron, that have been identified in several Locations in the country have not attracted commercial interest.

KAM Steel Sector Chair Mr Bobby Johnson highlighted that though the sector continues to grow, its full potential still remains unexploited, due to a variety of challenges including, high energy cost, Import Development Fees (IDF) and  Railway development levy (RDL) and illicit trade.

Zero Rating to improve sector competitiveness

“We have continued to lobby the government for Zero rating of IDF and RDL for all industry inputs to improve the sector’s competitiveness. In addition,  we are also keen on advocating for the development of clear procedures for smooth implementation of Buy Kenya, Build Kenya and local content – especially for large scale infrastructure projects with a high demand of steel.

If the Big 4 Agenda target to grow Manufacturing’s GDP contribution to 15% is to be met, we must address these challenges.  We remain resilient in engaging the government, with proposals to solve these issues, and anticipate that  favourable  changes shall be effected soon,” concluded Mr Johnson.

It is estimated that the country spends about 60 billion shillings (approximately 750 million US dollars per annum on importation of steel. This import bill can be reduced if high quality steel is produced locally. The development of the iron and steel sector has a spillover effect to other sectors of the economy and has the potential to create employment opportunities to Kenyans. A single steel plant of a capacity to produce 350,000 metric tons of steel per year can generate about 10,000 jobs not to mention the jobs created through other steel related activities.

Other production activities depend on imported hot rolled coils, used for re-rolling into cold rolled coils, which in
turn are processed into galvanized sheets, color coated sheets, bars, rods etc. In 2017, imports of iron and steel were 1.3 million tonnes valued at Sh83,580 million ($826.347 million). Iron and steel exports during the same year are estimated to have been 108,717 tonnes valued at Sh11,717 million ($115.754 million). The local deposits of iron ore and coal, which are the raw materials for the production of iron, have been identified in Kwale, Kitui and Tharaka Nithi but are yet to attract
commercial interest.

KAM is a Business Member Organization representing value-add companies and associate services in Kenya.  Its members’ significant contribution to the economy is estimated at a quarter of the country’s Gross Domestic Product. The Association provides an essential link for co-operation, dialogue and understanding with the Government and other key stakeholders by representing its members’ views and concerns through fact-based policy advocacy.

KAM promotes trade and investment, upholds standards, encourages the formulation, enactment and administration of sound policies that facilitate a competitive business environment and reduce the cost of doing business.

The Association houses the UN Global Compact Network Kenya chapter and its CEO – Ms. Phyllis Wakiaga is the network representative for the country.

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