Scrap metal woes need deeper intervention

In the year 2018, the Treasury Cabinet Secretary, through the budgetary statement increased duty on imported steel from 25 percent to 35 percent.

This, the CS said, was to protect local steel manufacturers against cheap imports and be in tandem with the Jubilee key flagship pillar on manufacturing and affordable housing.

A closer look shows the intervention created a reverse effect. Kenya has no known iron ore deposits sufficient enough to offer 100 percent raw materials for steel manufacturing.

Import duty budgetary protectionist measures would only work where, ceteris paribus, raw materials are locally and readily available.

What happened thereafter was that the construction industry had no option but to import the finished steel at the increased import duty to top up the meagre locally manufactured steel.

This created a huge black market for scrap metals as the local industries had a very huge leg room to increase the prices for locally produced steel to match up the prices for imports.

Finished product

The illicit scrap metal business loomed to unprecedented rates and today a kilo goes for Sh50. It has created a crazy vandalism enterprise.

For a win-win, the government ought to have realised that the number one competitor to the local steel industry was not the imported steel but the cost of electricity.

Electricity accounts for about 40 percent and thus the local industries were competing with countries like China where the cost of energy is at 16 percent of the total cost.

The government also ought to have banned or put trade tariffs to the exportation of scrap metals.

Kenya imports its steel from some Comesa members trading bloc and thus enjoys zero-rated import duty, reducing the intended impact of the 2018 budgetary intervention.

Reports indicate that some Kenyans have devised a cunning way of dealing with the high cost of import duty of steel by importing finished windows and doors from Uganda, Kenya’s neighbour.