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Capital Markets

Steel makers seek Sh40bn payment from retailers

A steel factory in Ruiru, Kiambu County
A steel factory in Ruiru, Kiambu County. Manufacturers are seeking cushion against delayed payments for supply. FILE PHOTO | NMG 

Steel manufacturers are pushing for prompt payments regulations and a credit-risk default cover to cushion them against delayed payments that have seen retailers withhold Sh40 billon.

Speaking in Nairobi at the end of an international steel forum attended by 15 global sector executives, Kenya’s 89 steel manufacturers said this should help improve cash flow and facilitate optimal operations.

“We are working at 40 percent capacity since most of our cash is held out there and introduction of this insurance cover means assurance that all steel products we release to the market is paid for promptly,” said Mr Bobby Johnson who is Kenya Association of Manufacturers (KAM) Steel Sector chairman.

The steel manufacturers hailed the “Buy Kenya Build Kenya” initiative saying they supplied steel products for the construction of the Nairobi-Naivasha Standard Gauge Railway.

They said incentives allowing incoming investors to import steel structures for construction of factories should be reviewed to compel them to use local steel products.

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They hailed the government’s crackdown on imported iron and steel products, saying it had shored up earnings and new demand.

“The anti-illicit trade war must continue to bar dumping of untaxed steel products onto the Kenyan market which denies us an opportunity to sell our products within Kenya and into the East African region,” he said.

The forum, attended by 15 global steel conglomerates, urged the government to review energy cost downwards saying the smelting phase of primary iron ore to a semi-finished product accounted for up to 40 to 50 percent of their operating costs.

According to the 2019 economic Survey, Kenya spent Sh97.7 billion on steel and iron ore imports and exported finished iron and steel products worth only Sh16.3 billion in 2018. They resolved to pursue partnerships that could attract primary steel and iron manufacturers, saying such investments could reduce money spent on importation of primary iron and steel products.

The steel sector currently employing 22,000 Kenyans also urged the government to consider zero-rating the Railway Development Levy and the Import Declaration Levy saying it made Kenyan made steel products more expensive than that from Uganda.

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