New mining levy set to raise price of cement

Cement makers have said that prices of the commodity will go up following introduction of a new mining levy by the government.

Producers will pay a levy of Sh140 per tonne of cement which translates to about Sh7 per 50kg bag.

In a gazette notice signed on December 18, Mining Secretary Najib Balala made the new levy effective but also cancelled a previous notice that had pegged the levy to one per cent of turnover.

The new levy will apply to both miners and importers of cement, unlike the previous proposal which was to affect local producers only.

“It will affect prices during the coming months,” said a chief executive of a cement company who sought anonymity as the increases have not yet been effected.

The new rule is likely to turn the tide for an industry whose prices have been on the decline due to price wars. Cement prices are currently at a 12-year low of Sh650 in Nairobi from a peak of Sh740 in 2008 and 2009.

READ: Rivalry for market share cuts cement price to 12-year low

Local cement firms produced 4.6 million tonnes of the commodity last year, putting estimated royalty collection from the sector at Sh644 million.

Fastest growing

The construction sector has been one of East Africa’s fastest growing over the last decade, fuelled by a burgeoning middle class with higher disposable incomes and the pouring of billions in real estate by high-net worth investors.

Increased consumption of cement in Kenya and neighbouring countries has attracted international players such as Nigerian billionaire Aliko Dangote who intends to set up a factory with a capacity of 5,500 tonnes per day in Kitui.

Three-quarters of all royalty fees received will be allocated to the National Government, 20 per cent to the County Government, and five per cent to surrounding communities as per the Mining proposed law.

Publication of royalty fees by the Mining ministry last year caused uproar among players in several sectors who felt that the fees were higher than international levies.

In the latest announcements the ministry has reviewed the cement, fluorspar and magadi soda products without mentioning the other minerals.

Mr Balala has also offered reprieve to miners of fluorspar and magadi soda products by spreading out the royalty fee of five per cent to be charged on the industry through five years to 2019. Magadi soda is used for production of salt.