In East Africa, the Kenya Association of Manufacturers (KAM) has voiced concern that the high cost of power, which pushes up the cost of production, is denying citizens low commodity prices.
The chairlady of the association, Flora Mutahi, stated that in comparison to neighbouring countries, local industries are paying higher tariffs, making locally produced goods uncompetitive, the Star reported.
KAM said this has resulted in local manufacturers struggling to meet their production costs, which is passed on to consumers, a move that has also slowed down the sector’s growth.
Electricity rates comparison
According to the media, KAM said Kenyan manufactures are paying an electricity tariff of $15 cents per kWh, compared to Ethiopia where sector players are paying as low as $0.4 per kilowatt hour.
Meanwhile, electricity rates in Egypt and Uganda are $0.6 and $12 per kWh respectively, KAM stated.
The association further noted that Tanzania recently reduced its tariffs to $14 cents, while South African manufacturers are paying $0.9 per kWh. KAM therefore claims that the country’s products can only become competitive if electricity tariffs are lowered to an average of $0.9 per kWh.
“When a manufacturer comes here [Kenya] the first thing they ask is what your tariffs are. Energy is a critical ingredient for manufacturing and a catalyst for increased industrial growth, job creation and revenue diversification,” Mutahi said.
Manufacturers have been on the spot for failing to lower the cost of goods made in Kenya despite the government having reduced the cost of power, media reported.
Meanwhile, KAM CEO Phyllis Wakiaga said that although the government has reduced the cost from $21 per kWh, more needs to be done.
“We are competing in a global environment where certain countries that are our close competitors have lower tariffs than we do,” Wakiaga said.
It is reported that KAM’s boss further highlighted that other factors also exist, such as taxes and regulatory frameworks, which she said have failed to protect local manufacturers.
“You find the finished product is coming in duty free, free of VAT but what is locally manufactured has 16% VAT,” she said.