The Kenya Association of Manufacturers (KAM) has registered its concern on the proposed increment in electricity tariffs by Kenya Power, effective 1 April 2023.
KAM chairperson Rajan Shah says the tariff increase shall see manufacturers’ cost of electricity increase by between Ksh3.5 and Ksh 5 per unit.
This will translate to a 38 per cent cost increase, depending on manufacturers’ respective tariffs and consumption levels.
In a press release issued on Wednesday, February 8, 2023, Rajan says the move will roll back the gains made when the cost of power was reduced by 15% in 2021.
“Kenya has one of the highest electricity tariffs in the region, currently at an average of $0.16 Per KWh compared to other African exporting countries such as South Africa, Egypt ($0.03), Morocco, Ethiopia ($0.05) and Tanzania ($0.08),” said the KAM chairperson.
“Tariff review that pushes up the cost of electricity will drive production cost even higher for local industries, rendering the manufacturing sector uncompetitive,” he added.
Cost of production
Rajan further said manufacturers have over time raised concerns over the high cost of electricity in the country, which impacts the overall cost of production.
The high cost has been attributed to various factors including expensive Purchase Power Agreements (PPAs), high cost of fuel, multiple taxes and levies imposed on electricity bills, forex, VAT and Fuel Cost Adjustment, as well as depressed demand growth – despite the increased power generation capacity, among others.
“Kenya’s competitive positioning on the strength of electricity is being eroded year on year despite investments in renewable energy resources. It is impossible for the country to be competitive as an investment destination and therefore industrialize in the absence of affordable, reliable, quality, and sustainable electricity for the manufacturing industry,” said the KAM chair.
“KAM’s position, therefore, is that the government should lower the cost of power to below $0.10 per unit, make power stable and readily available to industrial users to promote competitiveness in manufacturing locally and regionally,” he added.
The manufacturers’ chairman also insists that the burden of inefficiencies in transmission and distribution should not be borne by customers.
But in a bid to ensure the issues highlighted are addressed, Rajan said the association shall engage Energy and Petroleum Regulatory Authority (EPRA) in line with their advocacy agenda towards sustainable and stable policies, “which are key for driving manufacturing competitiveness”s.
