Kenya: Tax on Galvanised Wire Imports Opens Doors for Local Firms

27 October 2020

A decision by the government in June to impose a 25 percent tax on galvanised wire imports, has opened doors for local manufacturers.

The move has seen demand for the locally manufactured product and related products rise sharply.

As a result, some of the local galvanised and barbed wire manufacturers have embarked on robust expansion plans in a bid to increase their production to meet customer needs

Thika-based Blue Nile Rolling Millis recently invested Sh2 billion in putting up new infrastructure, which consist of a new plant and machinery to expand its production.

The new line has enabled the firm to produce 3,000 tonnes of galvanised wire per month.

Company operations manager Ibrahim Irungu said the move by the government on galvanised wire imports has helped the local manufacturers to grow.

"We are very grateful to the government support as it has helped to increase the demand of our products thus increasing our market share. Our expansion is meant to meet the growing demand for galvanised wire and related products among them barbed wire and others," he said.

Internal revenue

Irungu said the company funded the expansion drive through internal revenue and borrowing from local banks.

High cost of power he added is one of the major challenges that the company is facing with a monthly bill of between Sh25 and Sh30 million.

As a caution against the high cost of power, the company has installed a one Megawatt of Solar system. For galvanised wire, they use Liquefied Petroleum Gas (LPG) for the furnace.

Apart from the wire products, the company also through it's steel division manufactures Kifaru Steel Thermo Mechanically Treated (TMT) bars commonly known as Kifaru Steel Rebars, Steel Reinforcement Bars, Steel Deformed Bars. They also do Special Grade TMT bars up to UTS 850 on request.

Aside the local Kenyan market, the company also exports its products to Uganda, Tanzania, Rwanda, Burundi and Sudan.

The company has been supporting small scale local manufacturers who have been buying galvanised wire which they return to make chain links by producing galvanised wire in smaller sizes to make it easier for them to purchase and carry.

The firm is currently packaging galvanised wires into 450, 250, 100, 50, 25 and 20 kilogramme rolls.

"As a company, we are committed to support small and emerging local companies to grow. Currently, we have about small 50 manufacturers of chain links who come to get the galvanised wire from us," he said.

Roofing Kenya Limited is also currently setting up a galvanised wire manufacturing company in Mazeras, Kilifi County which is set to start operations in January.

The Sh2.5 billion investment was to start operations in August but was stalled by the Covid-19 pandemic. The company is set to be producing 4,000 tonnes of galvanised wire per month.

Roofings Kenya Limited Chief Operating Officer John Mucheru in a recent interview said the factory is almost complete and they are now proceeding to install machinery adding that by January they should be in production.

Excise duty

The country's demand of galvanised wire is estimated at about 5,000 tonnes a month, which translates to about 60,000 tonnes annually.

The government, as part of its plan to encourage and support the local manufacturing industry, part of the Big Four Agenda, in June introduced a 25 percent excise duty to discourage importation of galvanised wire.

Manufacturers of barbed wires, chain link fences, gabion boxes and razor wires had through the Kenya Manufacturers Association (KAM), been lobbying for reduction in the excise duty on raw materials of galvanised wire from 25 percent to 10 percent to boost production of the products locally.

There was an agreement between the National Treasury and local manufacturers to cushion them from imports on an understanding that there would be adequate capacity to supply the raw material.

Increased production is expected to offer thousands of jobs in a sector that currently employs about 8,000 people.

Currently, Blue Nile which sits on 10 acres of land in Thika employs about 700 people directly and 300 people indirectly.

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