Manufacturers laud power reduction, urge govt to expedite second phase

The Kenya Association of Manufacturers has called on the government to work with speed in its implementation of the second phase of the 15% reduction in power tariffs if the manufacturing industry is to fully gain from it.  

KAM Chairman Mucai Kunyiha in a statement said that the move is urgent especially as the economy continues to experience the impact of the COVID-19 pandemic, including rising costs, supply challenges and lower purchasing power.

According to the Kenya Association of Manufacturers 2018 Sector Report,  Electricity averages between 40 – 50 % of total conversion cost indicating that Manufacturers in Kenya suffer frequent blackouts and low voltage, which negatively impacts on the competitiveness of locally made products in the market. 

KAM emphasized that the high cost of electricity has been attributed to various factors, including expensive Purchase Power Agreements (PPAs), high cost of fuel, multiple taxes and levies imposed on electricity bills, VAT and Fuel Cost Adjustment, as well as depressed demand growth and inefficiency in the system despite the increased power generation capacity, among others. 

The body however welcomed the 15% reduction in power tariffs in the country, adding that Manufacturers shall enjoy a cost reduction of between 2.67 – 3.64 shillings per unit of electricity, depending on their respective tariff and consumption levels. 

The government hopes to see a reduction in the cost of production that will attract sectors that are high consumers of electricity such as steel. 

Going forward,  manufacturers say they want to support the government’s efforts in addressing the fuel cost component which is seen as one of the key factors in energy costs, including the expensive petro-thermal generation, whose cost is greatly affected by fluctuating global prices and exchange rates. 

KAM said in a statement: ´´To fully gain from the benefits of this move, we must keep an eye on the urgent implementation of the second phase of the 15% reduction in power tariffs, as announced by  President Uhuru Kenyatta during last year’s Jamhuri Day celebrations. We support the government’s efforts to address the fuel cost component that is one of the key factors in energy costs, as well as, the expensive petro-thermal generation, whose cost is greatly affected by fluctuating global prices and exchange rates.´´

Currently, the manufacturing sector’s contribution to the economy in Kenya has stagnated at around 10% of the gross domestic product (GDP).

The association pledged to remain committed to promoting the competitiveness of local industries noting that they will continue to engage the government and other stakeholders towards achieving overall sustainable and stable policies on the cost, availability, and reliability of power.