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bags of cement in a row [Courtesy]

The sharp rise in the cost of building materials should be a major concern for the state. This takes into account not only the impact this will have on Kenyan homebuilders, but also the risk of increasing the cost of mega infrastructure projects.

These could have the effect of slowing down the construction sector and, in turn, hurting the economy which has yet to fully recover from the ravages of Covid-19.

The construction industry has supported the Kenyan economy as other sectors have faltered, particularly in 2020, due to the impact of Covid-19. While many sectors have recovered or are on the way to a full recovery, the construction sector remains critical to the economy.

It is therefore essential to find solutions to some of the challenges that have caused a sharp increase in the cost of cement and steel to avoid the blockage of the sector.

While a number of them are factors beyond the control of Kenya, some of them are well within the control of the government. There is little the country can do about the Russian-Ukrainian war which has resulted in a limited supply of coal that cement producers use in clinker production.

However, among the factors that cause an increase in the cost of steel is also the ban on the trade in scrap metal. Local steel mills use scrap metal in steel production and although this may not be the magic wand to reduce the cost of steel, given that only a fraction of locally produced steel comes from scrap, this could help, to some extent, to tame the price increase. It might be useful for the government to speed up the process of reforming the sector and reopening it.

When it comes to cement production, manufacturers have in the past cited the high cost of energy as a major concern. The government recently reduced the cost of electricity by 15% and is also proposing a tariff that gives manufacturers a 50% reduction on the cost of electricity consumed during off-peak hours from 10 p.m. to 6 a.m. and under certain conditions.

Cement producers should consider these offers to reduce their production costs and ultimately ensure that a product is brought to market at a fair price.

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