Tax on iron, steel imports likely to hinder home ownership

The protection of iron and steel producers from falling prices could have a downer in increasing construction costs and discouraging home ownership.

Prices of the fabricated metals have rapidly dropped in the recent past on increased production, prompting exportation of the materials as producers seek higher revenues. Steel is Kenya’s largest manufacturing export to Uganda.

“I am worried about the measure. It could have counterproductive effects such as in housing,” said Gerishon Ikiara, an economics lecturer at the University of Nairobi, at a workshop organised by financial advisers Ernst & Young last Friday.

During the Budget presentation on Thursday, Treasury secretary Henry Rotich increased the import duty on iron and steel products to 25 per cent.

Biggest import

The products were previously either zero rated or charged a duty of up to 10 per cent. The increase was meant to cushion local manufacturers from cheap imports.

Steel valued at Sh81 billion was imported into Kenya last year, making it the third biggest import item after oil and industrial machinery.

In 2013, data from the Economic Survey 2014 shows that the price indices came down by 6.98 per cent while in the previous year the indices declined by 2.29 per cent.

Production indices, on the other hand, were up by 16.9 per cent last year compared to the previous year. In 2012, production indices had increased by 10.6 per cent relative to 2011.

At the post-Budget briefing, Vision 2030 acting chief executive officer Gituro Wainaina said the increase was justified because of miners who were exporting iron ore.

Dr Gituro said a company in Taita Taveta that was licensed as an explorer was currently exporting iron ore instead of selling it locally.

He was responding to questions on why imports were being restricted yet there was hardly any production of iron in Kenya.