Athi River Mining says jobs at risk after Nema closes plant

An order by the environment watchdog for closure of Athi River Mining (ARM) Kaloleni plant could see the firm lose hundreds of millions of shillings and put a thousand jobs in jeopardy, officials said on Monday.

Listed ARM’s management said that if the National Environment Management Authority (NEMA) does not lift its closure order the firm will be forced to let employees go home.

The plant employs 1,103 staff and supports another 10,000, according to the management. Chief executive Pradeep Paunrana, however, said the directive was yet to affect operations since the plant is temporarily shut down for pre-planned regular maintenance. The exercise is however expected to end on March 20.

“Right now we are under maintenance, but we do not know about next month and we may have to let people go,” said Mr Paunrana.
The plant is one of the few manufacturing clinker, a key ingredient in the manufacture of cement. If Nema’s order is not lifted soon, it will put pressure on ARM’s costs besides the country’s imports bill.

Kenya is a net clinker importer and only two other companies currently manufacture it locally. Francis Mwangi, a research analyst at Standard Investment Bank, said that in the absence of locally produced clinker ARM would have to join importers.

The Kaloleni-based plant has a 1,500 tonne clinker daily capacity and a 300,000 tonne annual cement grinding capacity. Freight charges, prices on the international and source markets make pricing of imported clinker difficult. But on average it costs between 40 and 50 per cent more than the locally produced stuff. Mr Mwangi said that like other manufacturers, ARM has clinker reserves and Nema’s orders will begin to hurt once they are exhausted. “ARM has reserves of clinker and it comes down to how long it will last,” said Mr Mwangi.

The Nema said that it gave the order due to materials used in manufacturing affecting neighbouring communities and the ecosystem but ARM accuse them of inconsistency.

“The closure was occasioned by poor operations at the company that were resulting in air pollution as the plant undertook operations in an open area as opposed to an enclosed one,” said regulator in a statement last week.

But Mr Paunrana said that the Nema was going back on an agreement which had given them up to September 2013 to solve the problem which both parties realised and accepted would take about 24 months.

The agreement, he said, was arrived at in June 2011 with the alleged pollution being one of the items on a long list of Nema demands some of which go beyond ARM’s realm.
For instance, Nema required that ARM tarmac or cabro tile a six kilometre road from the quarry to the factory but the road, said ARM’s management, is classified under the Kenya Rural Roads Authority.

ARM also sprinkles the road using a 20,000 litre water tanker, up from 10,000 and Mr Paunrana said that while the firm is trying to comply with the rules, the ad hoc manner in which they are popping is a concern.