Inside Kenya's multibillion scrap metal underworld

ScrapMetal
ScrapMetal

What you need to know:

  • A spot check by the Business Daily along the busy Haile Selassie Avenue in Nairobi shows the barricade that separates lanes moving in opposite directions has been torn away.
  • By the time President Uhuru Kenyatta banned trade in scrap metal last month, the government had been hit below the belt.
  • In the last nine years, Uhuru’s administration has spent more than a trillion shillings to put up new and refurbish existing road, rail and other hard infrastructure.

As Nairobi Expressway takes shape with finishing touches, a metal fence is being erected at sections of the Sh67 billion road; in what would be every scrap metal dealer’s dream if a ban on the trade was not in place.

A lucrative scrap metal trade is funding vandalism that had become so daring the culprits are filling away at public roads and carting away anything made of steel including lampposts, road barriers and even a footbridge.

A spot check by the Business Daily along the busy Haile Selassie Avenue near Muthurwa Market in Nairobi shows the barricade that separates lanes moving in opposite directions has been torn away, and now pedestrians cross the street at undesignated points oblivious of the dangers of speeding cars.

The rods that would have acted as restraints are clipped from the root, it’s hard to tell there was ever a barrier in some sections.

All that is left of a nearby footbridge linking Muthurwa Market to the opposite side of the road is an ugly skeleton –only with most of its bones missing.

In downtown Nairobi on Landhies, Ring Road, and Jogoo Road, the mess is replicated –as it is across the city. So grave is the situation that where such fixtures have been demolished, the authorities no longer replace them.

Then there’s the road infrastructure. Take Outer Ring Road, for instance, one of the newest in the capital. Between Kariobangi Roundabout and Allsops, a nine-kilometre stretch characterised by dangerous bends, few street lamps are operational anymore, only four years after the Sh4.6 billion road was launched.

Driving along the road at night is an extreme sport. Here, guardrails lie all over, detached from the barrier and waiting to be carted away to scrapyards.

Shaky regulations

For three weeks, the Business Daily has engaged industry stakeholders in an attempt to piece together the value chain of scrap metal dealerships in the country. We discovered that a toxic mix of shaky regulations and even feebler enforcement is the fulcrum around which vandalism revolves.

Fanning the madness even further is an insatiable demand for steel, with greedy traders and desperate collectors, some willing to go to any lengths to obtain steel.

By the time President Uhuru Kenyatta banned trade in scrap metal last month, the government had been hit below the belt. In the last nine years, Uhuru’s administration has spent more than a trillion shillings to put up new and refurbish existing road, rail and other hard infrastructure.

The Kenya Roads Board, for instance, set aside Sh59 billion last year for road maintenance. Ten percent (Sh5.9 billion) of these funds were spent to replace vandalised road fixtures, according to the Kenya National Highways Authority.

In 2020, the Scrap Metal Council said the energy, transport and communication sectors were bleeding the most from vandalism, amounting to economic sabotage.

There are claims that milling plants fuel vandalism of utility infrastructure by buying metal from the criminals before refabricating it into new products.

Following the ban, the government has mounted a crackdown on scrap metal traders countrywide. In Nyeri and Nairobi counties, traders have had to close down their yards.

At Jua Kali area on Jogoo Road, fabricators are already feeling the sting of the ban, with minimal activity going on at the vast market. Steel is the main raw material for production of household wares and industrial wares that come from this market.

The real beneficiaries

While collectors of scrap metal are usually the primary targets of crackdowns, the real beneficiaries are traders who run warehouses and scrapyards. Collectors deliver the scrap to specific points and scrapyards. It is they who either export the commodity or sell it to local manufacturers.

The Metal and Allied Sector at the Kenya Association of Manufacturers (KAM), however, argues that as a direct beneficiary of development projects through the supply of steel products, its members are not involved in the trade.

‘‘As a manufacturer, the scrap that comes in 10 or 20-kilo units can’t compare to what I get when I produce more to supply to the government’s construction projects,’’ says Bobby Johnson, the chairperson of KAM.

He says KAM members do not rely on scrap metal sources owing to their unpredictability, noting that Kenya produces mostly light scrap, which is undesirable to many steel manufacturers.

‘‘There are three categories of scrap metal: light, medium and heavy scrap. Kenya isn’t a large generator of good quality scrap metal that manufacturers need to [fabricate] into products,’’ he says, but is guarded on the quantity of used metal that constitutes the total (steel) input for KAM members.

Besides vandalism, theft of metal rods is the second-largest feeder of the scrap metal trade in Kenya. Gangs of youth roaming neighbourhoods in search of any metallic objects are a common feature. To these collectors, scrap metal means anything that can be converted to quick cash: a door loose on its hinges or hanging line poles.

So rampant is the trade that sometimes these collectors steal from construction sites, with building material and tools at most risk of loss.

But it is the export of scrap metal that’s the cream of the trade. Data from the Kenya National Bureau of Statistics (KNBS) shows the country exports about 13,000 tonnes of scrap metal annually. This translates to about 1,083 tonnes (1.08 million kilogrammes) of scrap metal every month.

But where does this “waste” metal go?

Export markets

Statistics from TrendEconomy indicate that India was the main destination of scrap metal from Kenya in 2020, commanding a 69 percent share. The United Arab Emirates was a distant second with 27 percent while Thailand, the United Kingdom and Rwanda took 2.81, 1.96 and 1.46 percent of the share respectively.

Waste and scrap of stainless steel account for the bulk of the export at 99 percent, according to the report. Waste and scrap of cast iron constituted less than one percent of the total shipments.

Meanwhile, KAM argues that up to 90 percent of the material used in infrastructure is galvanised steel –with zinc coating – which many manufacturers reject.

‘‘Galvanised steel is like adulterated fuel that destroys a car’s engine. It’s poison to your plant that could destroy furnaces. It could potentially cause accidents as well. Many plants wouldn’t allow this kind of used metal to be offloaded in their yard,’’ he says.

Cutting corners

On whether the lobby vets its members to ensure compliance with industry regulations, Johnson argues that players have the freedom to choose what raw materials to buy — whether imported or scrap steel.

So, how does the industry deal with players who cut corners? Johnson insists that not all steel manufacturers in the country are members of KAM. ‘‘Only about 60 percent of the manufacturers are our members.’’

There’s concurrence within the sector, though, that the high cost of steel, compounded by disruptions in the global value chains, could be driving vandalism of structures locally as players are pushed to the edge.

Last year, iron-ore prices were projected to be 30 percent higher than in 2020, according to estimates by the World Bank. The cost of the commodity is expected to continue rising this decade as the country enters the final stretch of its Vision 2030 development agenda.

Yet even with the high cost of steel in the world market, it still costs cheaper in Kenya, with a demand-supply ratio of 300 percent, says Jonson. This pushes manufacturers to sell their products at lower rates to woo buyers.

He adds: ‘‘We’re a market that’s completely buyer-driven. For a small market like Kenya, there are about 20 steel manufacturers. The competitive nature of the industry forces some manufacturers to sell at whatever price [to remain in business].’’

Uhuru’s first ban attempt

In 2009, the Grand Coalition government proposed a ban on export of scrap aluminium, steel and copper wires and cables. Coincidentally, it was Uhuru Kenyatta, then Finance minister, who announced the proposed ban while presenting that year’s national budget to Parliament.

He noted that Telkom Kenya and Kenya Power and Lighting Company were losing billions of shillings to vandals, necessitating the drastic move.

The proposal was, however, met with stiff opposition. The Bureau of International Recycling and the European Metal Trade and Recycling Federation (Eurometric), for instance, both argued that the ban on scrap metal export would not stop theft and that vandalism was a global challenge.

In 2015, the National Assembly enacted the Scrap Metal Act to regulate the trade. Seven years later, the law is yet to take effect after the government failed to regularise the trade. This Act was meant to provide guidelines on vetting and licensing traders in scrap metal.

The Scrap Metal Council is also established under the Act with among other functions, to protect ‘‘public interest against vandalism and theft of utility infrastructure and private property.’’

Simmering antagonism

It’s this vacuum that has led to the orgy of vandalism of installations to feed an industry whose appetite grows cavernous by the year.

Last week, an impasse emerged after Parliament warned the Ministry of Trade against imposing a moratorium on scrap metal trade.

In the intervening days of the president’s order, the Trade ministry rushed to formulate regulations, only to emerge later that there was no public and stakeholder involvement –effectively making them legally void.

Speaker Justin Muturi argues that other than through a judicial process, a moratorium can’t be imposed on an act of Parliament. Regulations on any sector must be considered by Parliament to become law.

Local recyclers want the ban to be suspended as a lasting solution is being sought. Lawmakers also want the government to review licences of some of the dealers.

As the antagonism simmers, the country is in the dark as to when the matter will be resolved, to allow traders to go back to business within a regulated environment.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.