3 December 2017

Kenya's Plan to Beat Peers in Attracting Investments

Kenya has embarked on various plans to boost its attractiveness to investors, starting with incentives on cheaper electricity.

Apart from increasing generation capacity and making supply more reliable, Kenya is rolling out a number of projects to lower the cost of power.

Kenya Power, for instance, is wooing investors to put up industries near power generation plants so as to cut transmission costs by up to 60 per cent. Managing director Ken Tarus said manufacturers near places such as Olkaria in Naivasha, where geothermal power is generated, will pay less for power.

"Industries should put up commercial or economic zones (near electricity generation zones|) so that when power is generated, it is immediately given to these industries without additional costs that come with transmission and distribution," he said.

He made the remarks during the 14th Academy for Global Business Advancement conference organised by Moi University. The forum brought together scholars and entrepreneurs.

Giving special tariffs to manufacturers would ensure use of power that could have gone to waste. "Remember, we are dealing with a commodity that you cannot store awaiting demand," he added.

Kenya is also offering cheaper night tariffs as part of efforts to lower the cost of production and make local products competitive in the global market.

Last week, the Energy Regulatory Commission announced that it would from December 1 offer discounted tariffs for commercial and industrial power users who operate from 11pm to 5am. The ERC said the plan would see power tariffs cut by up to a third for large businesses and manufacturers that operate at night.

The regulator expects industrialists to pass the benefits of lower costs to consumers in form of cheaper commodities.

"The move will also maximise on the surplus energy available at off-peak hours," said ERC acting director-general Pavel Oimeke. It will also ease demand during peak hours, when Kenya Power is often forced to switch to expensive diesel generators.

Kenya consumes less than half the peak power demand (currently 1,727 megawatts) between midnight and 5am. Peak time stretches from 9am and climaxes at between 6pm and 9pm when most people return home from work.

This is not the first time that night tariffs have been adopted. A similar plan was introduced in 1999/2000 but it did not succeed. The electricity distributor incurred heavy losses after many large consumers shifted to off-peak times.

Mr Tarus said special night tariffs would be instrumental in making Kenya a preferred destination for investors.

According to Kenya Association of Manufacturers, industries in Kenya pay Sh15 or $15 cents per kilowatt hour compared with Ethiopia, where they pay $0.4 cents. In Egypt, they pay $0.6 cents, Tanzania ($14 cents; Sh14), Uganda ($12 cents; Sh12) and South Africa $0.9 cents per kilowatt hour.

"The country faces a trade imbalance between imports and exports. The bulk of exports are raw materials. We want to support new, value addition industries," added the MD.

Trade Principal Secretary Chris Kiptoo said imports are three times higher than exports.

"We are negotiating with countries like China and India on areas where we can engage in trade," stated the PS.


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