KAM fears new clinker levies could derail Kenya's cement export growth

Kenya's growing ambition to dominate the regional cement market could be threatened by a fresh tax burden targeting clinker exports, with manufacturers warning that the proposed charges may make locally produced materials more expensive and weaken the country's ability to compete with other suppliers.

The Kenya Association of Manufacturers (KAM) has raised objections to plans to impose a two per cent royalty fee and a one per cent Mineral Development Levy on exported clinker, arguing that the move could penalise companies that have spent billions of shillings expanding local production.

The manufacturers say clinker should not attract mineral royalties because it is a processed product obtained from naturally occurring raw materials rather than a mineral extracted directly from the ground. They maintain that applying the charges would introduce an additional layer of taxation on an industry that has been investing heavily in domestic manufacturing.

KAM chief executive Tobias Alando said the proposed levies could reverse the progress made by cement producers in reducing Kenya's reliance on imported clinker and developing capacity to serve regional markets.

“These proposed charges could erode the gains made by the cement industry in transitioning from heavy reliance on imported clinker to domestic production and exports,” Alando said.

The association presented its concerns during discussions with Principal Secretary in the State Department for Mining Harry Kimtai, focusing on how the charges would be applied under the Mining Regulations, 2024.

The proposed fees come as Kenya's cement sector undergoes a major expansion, with companies directing substantial resources towards clinker production to reduce import bills, increase local value addition and tap into demand from neighbouring countries.

KAM warned that the additional costs could make it more expensive for manufacturers to produce and ship clinker, potentially reducing the competitiveness of Kenyan products in regional markets.

“The additional costs risk creating multiple taxation burdens for manufacturers, increasing the cost of production and exports,” the association said.

The manufacturers fear that the proposed charges could also affect export volumes and weaken the incentive for companies to establish or expand clinker production facilities locally. This could threaten the expected returns from investments already committed to the sector, particularly as firms position themselves to serve the wider East African market.

Clinker is a key material in cement production, manufactured by heating limestone and other raw materials at high temperatures. It is then ground with gypsum and other additives to produce cement.

Kenya has been moving away from dependence on imported clinker towards local production, with manufacturers investing in large-scale facilities to meet domestic consumption and supply export markets.

Devki Group is among the companies making substantial investments in the sector, with its Sh70 billion clinker and cement project in Ngaaie, Kitui County, expected to strengthen local manufacturing capacity.

Bamburi Cement is also investing Sh32 billion in a clinkerisation plant in Matuga, Kwale County. The project is designed to provide an additional 1.6 million tonnes of annual production capacity.

Rai Cement has also committed Sh30 billion to a factory project in Kisumu, while Devki Group has made investments in West Pokot, adding to the growing list of major projects aimed at expanding the country's cement manufacturing industry.

The manufacturers argue that introducing fresh charges on clinker exports could undermine these investments by pushing up the cost of Kenyan products and making them less attractive compared with supplies from competing markets.

The scale of the industry's growing export activity is reflected in the 2024 trade figures, when Kenya shipped approximately 1.81 billion kilograms, equivalent to 1.81 million metric tonnes, of cement clinker.

The exports fetched about $114.56 million (Sh14.89 billion), highlighting the value of the market that manufacturers fear could be affected by the proposed levies.