Kenya Association of Manufacturers (KAM) would like to register its concern on the proposed increment in electricity tariffs by Kenya Power and Lighting Company, effective 1 April 2023.
The increment shall see manufacturers’ cost of electricity increase by between Ksh. 3.5 and Ksh. 5 per unit, translating to a 38% cost increase, depending on their respective tariff and consumption levels. This 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 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). Tariff review that pushes up the cost of electricity will drive production cost even higher for local industries, rendering the manufacturing sector uncompetitive.
Manufacturers have over time raised concerns over the high cost of electricity in the country, that impacts on 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.
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. The burden of inefficiencies in transmission and distribution should not be borne by customers.
The Association shall engage Energy and Petroleum Regulatory Authority (EPRA) on the above concerns as we advocate for the reduced cost of power, in line with our advocacy agenda towards sustainable and stable policies, which are key for driving manufacturing competitiveness.
By Rajan Shah, KAM Chairman