Homes for sale in Thika. The cost of building and construction is set to
go up with cement makers increasing the price of th product. FILE
By ALLAN ODHIAMBO and DAVID HERBLING
In Summary
- The cost of building houses, roads, airports and ports is expected to rise significantly under the new construction materials pricing regime that has seen ex-factory cement prices rise by at least Sh20 per bag beginning this week.
- The latest price increase is in response to a government directive requiring cement makers to pay in Sh140 tax per tonne of cement, which translates to about Sh7 per bag.
- The new levy is expected to earn the government at least Sh659.5 million a year going by Kenya’s 2012 total cement output.
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 construction industry on an inflationary
path.
The cost of building houses, roads, airports and
ports is expected to rise significantly under the new construction
materials pricing regime that has seen ex-factory cement prices rise by
at least Sh20 per bag beginning this week.
The latest price increase is in response to a
government directive requiring cement makers to pay in Sh140 tax per
tonne of cement, which translates to about Sh7 per bag.
“We have increased prices by Sh20 effective Monday,” said a sales representative at Bamburi Cement. This has pushed Bamburi’s ex-factory prices to Sh660 from Sh640 for a 50-Kg bag of cement.
Savanah Cement said that though it had not effected price changes it was bound to pass on the levy to the consumer.
“It is a burden that is obviously over and above
our usual cost of production and we shall not soak it but pass it on to
the consumer,” the company’s chairman Benson Ndeta said without
disclosing the details
.
.
Distributors expect other cement producers, including East Africa Portland Cement Company (EAPCC) and ARM Cement (ARM),
to make similar moves. Kenya’s cement industry is tightly knit and
players tend to act in unison while making critical decisions such as
pricing.
The new levy is expected to earn the government at least Sh659.5 million a year going by Kenya’s 2012 total cement output.
In a gazette notice signed on December 18, Mining
secretary Najib Balala said cement producers would be required to pay a
Sh140 tax for every tonne of cement produced — repealing a previous
notice that charged the levy at the rate of one per cent of turnover.
The new levy applies to both miners and importers
of cement, unlike the previous proposal which only applied to local
producers.
Three-quarters of all royalty fees received will
be allocated to the national government, 20 per cent to the county
government, and five per cent to communities living around the
cement-making factories. Mr Balala’s latest gazette notice also
increased levies charged on fluorspar and soda.
The minister, however, offered reprieve to miners
of fluorspar and soda by spreading out the five per cent royalty fee
over a five-year period ending 2019.
The new cement prices have brought to an end the
prolonged period of stable prices that was mainly attributed to market
wars among the country’s seven manufacturers.
Until this week, ex-factory cement prices averaged Sh645 a bag compared to a peak of Sh740 in 2008 and 2009.
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