High Cost of Electricity in Kenya Forcing Industries to Relocate

The high cost of electricity for industries in Kenya is prompting manufacturers to move their business to other countries where the cost of production is lower.

This is happening even as the government constantly claims that it is doing all it can to lower the power tariffs for large scale consumers.

The high cost of power in Kenya doesn’t only make locally produced products less competitive but shuns away potential investors.

Read ‘The More Power You Consume the More a Unit will Cost,’ Kenya Power’s New Charging System

Ironically, some studies rank Kenya as a good place to run a business. Apparently, the move by one of the companies in the country, which is among the leading suppliers of glass in the country is planning to set up a plant in Ethiopia as a result of high-power tariffs in Kenya.

According to The Standard newspaper who conducted an interview, the manufacturer said that once successful, the move will see the firm half the price of its products in Addis Ababa due to low costs of production.

According to an employee of the company, they are paying 21 shillings per kilowatt of power but if they relocated to Ethiopia, they would pay only 4 shillings per kilowatt.

Incidentally, power bills for the company hit 300 million shillings in a month.

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Relocated Firms

The company will not be the first company to leave Kenya. There are several other companies that have left the country with the majority heading for Egypt and Ethiopia where the cost of production is way lower than in Kenya.

In 2016, Sameer Africa, the manufacturer of Yana Tyres closed its Nairobi plant due to stiff competition from cheap tires from China and India.

The influx of tire imports crippled the company and upon closure, hundreds of jobs were lost.

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Citing lower labor cost and cheap electricity prices, Eveready, the battery manufacturer as well as Cadbury Kenya shut down their operations in the country in 2014 and relocated to Egypt.

Consequently, there are reports that another manufacturer of biscuits is also planning to move to Ethiopia on account of high electricity prices.

The Limitation

Kenya has made strides in the energy sector and it has added geothermal power to the national grid. However, the cost of power has remained high even for households.

See Why the New Electricity Charges are Exorbitant and Ridiculous

Small and Medium-sized enterprises (SMEs) have also been hard hit and in 2018, President Uhuru Kenyatta promised to address the issue among other constraints hindering their growth.

Statistics show that the cost of power has risen from 11 shillings per kilowatt in former President Mwai Kibaki’s tenure to the current 21 shillings.

Even Peter Munya, the Trade and Industry CS agrees that the cost of power in the country is crazy and it remains a major constraint in the country’s goal to be regionally competitive.

“Key constraint of manufacturing has been the cost of power, but the Government has been consistently addressing it,” said Munya.

Read Universal Access to Electricity in Kenya Set to be Achieved by 2022

Source: The Standard