Business Daily
Date: 15.01.2014
Page 33
Article size: 573 cm2
ColumnCM: 127.33
AVE: 241933.33
Homes to cost more as new
levy raises price of cement
Construction
sector inflation
looms as raw
materials tax also
comes into force
BY ALLAN ODHIAMBO AND DAVID
HERBLING___
Cement makers have increased retail
prices in response to the government's
recent decision to impose a new levy
on key raw materials setting the con­
struction industry on an inflationary
path.
The cost of building houses, roads,
airports and ports is expected to rise
significantly under the new const™ r­
tion materials pricing regime that has
seen ex­factory cement prices rise by
at least Sh20 per bag begmning this
week.
The latest price increase is in re­
producers, including East Africa Port­ reprieve to miners of fluorspar and
land Cement Company (EAPCC) and soda by spreading out the five per cent
Athi River Mining (ARM), to make royalty fee over a five­year period end­
similar moves.
going by Kenya's 2012 total
tory cement prices aver­
cement output
aged Sh645 a bag compared
In a gazette notice
signed on December 18,
to a peak of Sh740 in 2008
sponse to a government directive re­
quiring cementmakers to payin Shl40 Mining secretary Najib
tax per tonne of cement, which trans­ Balala said cement pro­
ducers would be required
lates to about Sb7 per bag.
to pay a Shl40 tax for every
"We have increased prices by Sh20
effective Monday," said a sales repre­ tonne of cement produced
sentative at Bamburi Cement This has — repealing a previous no­
pushed Bamburi's ex­factory prices to tice that charged the levy
Sh660 from Sh 640 for a 50­Kg bag of at the rate of one per cent
ofturnover.
cement.
ing 2019.
Kenya's cement industry is tightly
The new cement prices have brought
knit and players tend to act in unison to an end the prolonged period of sta­
while making critical decisions such ble prices that was mainly attributed
as pricing.
to market wars among the
The newlevy is expected
country's seven manufac­
turers.
to earn the government at
least Sh659.5 million ayear
Until this week, ex­fac­
and 2009.
"Cement prices must
climb now because what
is at play is a mandatory
government levy that
cannot be overlooked,"
Sam Chege, a salesman at
hardware shop on Nairobi's
Gaborone Road, said.
The price increases are expected to
The new levy applies to both min­ hit bulk cement buyers hard because of
Savanah Cement said that though
it had not effected price changes it ers and importers of cement, unlike the the large amounts of units involved.
Highly priced construction material
was bound to pass on the levy to the previous proposal which only applied
to local producers.
poses the risk of slowing down activity
consumer.
Three­quarters of all royalty fees in the real estate sector that has grown
"It is a burden that is obviously over
received will be allocated to the na­
robustly in the past eight years, sup­
and above our usual cost of production
and we shall not soak it but pass it on tional government, 20 per cent to the ported by a swelling middle­class with
to the CEMENT, Page 4» county government, and five per cent disposable income.
consumer," the
company's chairman
Benson Ndeta said without disclosing
the details.
Distributors expect other cement
Cement production grew by 3.6 per
to communities living around the ce­
cent to 4.63 million tonnes in 2012, ac­
ment­making factories. Mr Balala's lat­
est gazette notice also increased levies cording to Economic Survey 2013.
Cement consumption and stocks
charged on fluorspar and soda.
rose from 3.8 million tonnes in 2011 to
The minister, however, offered
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
Business Daily
Date: 15.01.2014
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Article size: 573 cm2
ColumnCM: 127.33
AVE: 241933.33
3.93 tonnes in 2012.
The government has defended the
introduction of the new mining sector
taxes and royalties and levies arguing
that the proceeds would be used to sup­
port the economy.
Some analysts, however, expect
stable prices of other key construc­
tion materials such as iron, steel and
timber to slow down inflationary pres­
sure in the construction sector in the
short term.
"Steel prices have remained stable
at about $1,020 atonne and we expect
that to continue for some time," said
Narendra Naval, the managing direc­
tor of Devki Steel Mills.
The International Monetary Fund
(IMF) has in a new commodity out­
look report released yesterday said
increased capacity has pulled down
overall global prices of metal by about
seven per cent.
"Metals prices rose by 0.8 per cent
in December on declining stocks and
ongoing recovery in global industrial
activity," the IMF said. Continued build­
up of supply capacity has, however, con­
tinued to weigh on markets, causing
prices to ease in early January.
All metals prices fell in 2013 except
iron ore which gained five per cent on
strong import demand from China.
Timber dealers' prices have also
remained stable over the year helping
to stabilise costs in the construction
market. George Gitonga, a trader and
former national chairman of the Timber
Manufacturers Association (TMA), said
prices remain stable and are expected
to stay so in the near term.
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya
Business Daily
Date: 15.01.2014
Page 33
Article size: 573 cm2
ColumnCM: 127.33
AVE: 241933.33
A house under construction in in Kibos in Kisumu County. The cost of building and
construction is set to go up with cement makers increasing the price of th product, file
Kenya's cement production
('000 tonnes)
cement production estimated to have
grown by 3.2 per cent last year
5000­
2009 2010 2011 2012 2013*
SOURCE: KNBS
Cement prices
must climb
now because
what is at play
is a mandatory
government levy
that cannot be
overlooked
SAM CHEGE
HARDWARE SALESPERSON
Ipsos Kenya ­ Acorn House,97 James Gichuru Road ­ Lavington ­ Nairobi ­ Kenya