HomeRegional NewsEast AfricaHigh cost of power in Kenya affecting manufacturers

High cost of power in Kenya affecting manufacturers

Patrick Nyoike,
Permanent Secretary
13 April 2010 – The East African Community Common Market will soon be operational, yet Kenyan manufacturers are seeking government concessions on energy in a bid to remain competitive under the new arrangement.

The manufacturers are also enhancing their energy management procedures to boost efficiency in production processes and save on energy costs. The flurry of activity, barely three months to the enforcement of the EAC Common Market is based on the argument that since Kenya has the highest power tariffs in the region, they will be disadvantaged against their colleagues whose costs of production are much lower.  

They are now proposing that the government introduces a two year tax window during which they will enjoy power at half the current cost. This, chairman of the Kenya Association of Manufacturers (KAM) Vimal Shah said, would give them a reprieve and act as a stimulus package as the Common Market comes into force.Mr Shah said that Kenyan manufacturers pay up to $0.2 per unit of electricity while their counterparts in Uganda and Tanzania pay only $0.09 per unit.

These high power costs have eroded their competitiveness hence the need for strategies to address them.Already, talks are ongoing between the Ministry of Energy and the Treasury with a view to introducing subsidies for manufacturers. Permanent Secretary in the Ministry Patrick Nyoike said: "Uganda has a generation mix similar to ours but there is a direct subsidy by the government. We are engaging Treasury for the same."According to Mr Nyoike, the high power costs in the recent past have resulted from the prolonged drought that caused a drop in the country’s hydropower output.

With reduced output, the country resorted to expensive emergency power sources.

To avoid a repeat of similar circumstances in future, the government is pursuing combined exploitation of hydropower and geothermal energy sources.

It is expected that by the end of next year, there will be enough energy to cover the demand.The current costs of energy have led to firms lining up strategies to improve efficiency in consumption.

So far these firms have made savings of up to $36 million in energy bills, according to the Centre for Energy Efficiency and Conservation (CEEC), a joint initiative of KAM, the government and the United Nations Development Programme. As part of its approaches to encourage energy efficiency, the CEEC has introduced the Energy Management Awards to recognise firms for their contribution to energy conservation.The CEEC estimates that the 200 firms that participated in the recently held sixth edition of the awards saved $26,315,789 worth of energy last year and avoided carbon emissions of up to 530,000 tonnes. Speaking at the award ceremony, executive director of the United Nations Environment Programme Achim Steiner said that contrary to the myth that energy efficiency is only relevant to the developed and industrialised economies, developing economies can also make substantial savings by implementing it.Usually, it is assumed that the small economies first need to make electricity and energy available before they can think of efficiency.