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Economy

Cement firms export income falls 65pc

affordable housing project
Workers at an affordable housing project in Ngara on Park Road, Nairobi. FILE PHOTO | NMG 

Earnings from exports by Kenyan cement firms have touched a new low, signalling loss of job opportunities to regional countries in the wake of a drop in domestic orders.

Preliminary exports statistics by the Central Bank of Kenya (CBK) show income from domestic cement exports plunged to Sh362.28 million in the first six months of the year, a 65.28 percent dip compared with Sh1.04 billion a year earlier.

Kenya’s cement exports in the review period have been declining sharply since 2015 largely due to setting up of new grinding plants and expansion of existing ones in Uganda and Tanzania.

“We have seen increased capacity in Uganda in particular especially for Bamburi Cement,” ICEA Lion Asset Management head of research Judd Murigi said.

“A lot of Kenyan cement was supplying in the Ugandan market but now with the increase in capacity in Uganda, that has lowered the need for Kenyan operations of Bamburi to supply.”

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Bamburi Cement Group’s subsidiary in Uganda, Hima, in May last year started production at 800,000-tonne-a-year capacity grinding factory in Tororo, put up for $40 million (Sh4.13 billion) from January 2017.

The station has supplemented output at the main plant at Kasese, raising Hima Cement’s annual production capacity to 1.7 million tonnes. “With the commissioning of Tororo Grinding Station, production constraints have reduced significantly,” Bamburi wrote in the 2018 annual report published in April.

Sales in Tanzania have, on the other hand, partly been hit by the collapse of ARM Cement, Mr Murigi said.

The data show cement exports in the January-June period have sharply contracted from a recent high of Sh4.68 billion in 2012 to Sh2.67 billion in 2016, Sh1.78 billion (2017), Sh1.04 billion last year and Sh362.28 million this year.

Housing has been one of Kenya’s fastest-growing sectors in the last decade, with returns from real estate outpacing equities and government securities.

The property market has, however, suffered dipping growth in sales and rental prices in recent years, surveys by Kenya Bankers Association as well as consultancies such as Knight Frank and HassConsult have suggested.

This has partly been attributed to reduced flow of loans to homes following the enforcement of legal ceiling on interest rates, hurting house sales in the process.

Flagging sales domestically and regionally reduces the room for cement factories to create jobs, with some like loss-making State-controlled East African Portland Cement Company opting to sack workers and rehiring a fraction on contracts in efforts to cut costs.

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