By JAMES ANYANZWA

Kenya is set to raise duties on imported clinker to curb unscrupulous cement makers involved in the malfeasance trade.

Nairobi says some errant cement companies have abused the region’s low 10% tax regime and wants to discipline them with a tax hike on imported clinker, which is a key ingredient in cement manufacturing.

The specific duty to be levied is still under discussion among East African Community states as part of the overall Common External Tariff (CET) reform program.

This latest development comes after Kenya rejected the findings of a regional study to determine the quantity and quality of clinker.

East Africa learned that various stakeholders refused to adopt the report of the Independent National Clinker Verification Committee on the grounds that the study did not justify why some local cement manufacturers were importing clinker while producing the same product locally and exporting to EAC countries.

“Some of these cement companies import clinker and the same companies extract clinker and export it to neighboring countries. So we need to come together to discipline this behavior because you cannot import a raw material and export the same raw material at the same time,” said Kenya’s Principal Secretary for Trade and Industry, Johnson Weru. East Africa in an interview last week.

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“The Treasury and the Department of Commerce are saying we need to discipline these companies. But who is going to bell the cat? he asked.

New structure of the TEC

According to Kenya’s Ministry of Trade and Industry, clinker is among 115 tariff lines yet to be agreed by EAC member states under the revised four-band CET structure.

“We have an ongoing conversation about what rate to charge, between 10 and 25% for clinker, but this was never discussed as a substantive program within the Trade, Finance and Investment sector committee. , unless a Member State introduces it as such”, says Weru

“What we are going to do first is agree on the common duty that we are going to charge externally.

”You know you can’t target a single product in a band because that equates to discrimination. So once we agree on the right at that particular point, we will know where to place the clinker,” he added.

Last year, Kenya launched an inquiry into the status of locally made clinker in a bid to quell the then simmering dispute between cement makers and the Kenya Manufacturers Association (KAM) over a proposal to increase the common external tariff on imported clinker to 25%. from 10 percent.

The government says the inquiry report failed to address the abusive business practices of some cement companies that also sit on key decision-making bodies of KAM, creating a conflict of interest.

“The report has not been fully adopted by various stakeholders, so we are still in consultation,” Weru said.

KAM CEO Phyllis Wakiaga said East Africa that the current 10 percent duty rate on imported clinker is still valid because EA member states have not engaged in discussions to increase the rate.

In 2020/21, National Cement Company and Mombasa Cement submitted a proposal to increase duties on imported clinker from 10% to 25%, arguing that they have sufficient capacity to meet overall local demand for clinker in Kenya. .

But Bamburi Cement, Savannah Cement, Rai Cement and Ndovu Cement, which depend on imported clinker for cement production, took up arms against the proposal, saying the move would lead to unfair competition and destroy investment.

Only two companies – Mombasa Cement and National Cement Company – produce their own clinker.

“We wonder why someone should import something that is locally available and then participate in exporting,” Weru said.

Clinker shortage

Among the findings of the Independent National Clinker Verification Committee report, Kenya is grappling with a clinker shortage of 3.3 million tonnes, or 40% of demand, with 59% of this deficit being imported into the country by duty free from Egypt.

However, four cement companies have clinker production plants with a combined annual production capacity of around eight million tonnes.

The report shows that an increase in duties on imported clinker is likely to redirect trade in favor of Egypt by virtue of the two countries’ membership of a common customs union under Comesa.

In 2020, Egypt and the United Arab Emirates accounted for 92% of the clinker imported by Kenyan companies, with the rest coming from Saudi Arabia.

Currently, finished goods imported into the regional bloc are subject to a 25% duty, intermediate goods (10%) and raw materials at 0% under the existing EAC three-band tariff structure which entered into effective January 1, 2005.

In addition, there is a list of sensitive items such as sugar, wheat, which are subject to higher tariffs above 25% in an effort to protect local industries from competition.

However, member states have agreed to revise the bloc’s CET, replacing it with a new four-band tariff structure.

Under the revised four-band tariff structure, partner states agreed to 0% import duty for raw materials and capital goods, 10% import duty for unavailable intermediate goods in the EAC region and 25% import duty for intermediate products available in the region. EAC region.

However, views differed on the rate to be applied to the fourth tranche of finished goods, but last month (February), the EAC Secretariat broke the deadlock by proposing a 35% tariff on finished goods. imported finishes based on a thorough analysis of various functions including 30 percent, 33 percent and 35 percent.

Clinker is currently subject to a 10% duty under the EAC Common External Tariff (CET) regime for intermediate goods.