Kenya Regulates Construction: 9 Steel Firms Fined Ksh338M
To regulate the construction industry, the Kenyan Competition Authority (CAK) fined nine steel companies Ksh338 million.
After receiving a comprehensive report from an investigation into whether the accused companies fixed prices, thereby causing an increase in the cost of construction materials, CAK imposed these sanctions.
Devki Steel Mills, which is owned by the billionaire Narendra Raval, was one of the corporations fined. Others included Corrugated Steel Ltd. and Tononoka Rolling Mills, both of which were owned by businessman Dharmesh Savla.
Fines were also imposed on Doshi & Hardware Ltd, Jumbo Steel Mills Ltd, Accurate Steel Mills, Nail and Steel Products, Brollo Kenya Ltd, and Blue Nile Wire Products Ltd.
According to CAK, the fined companies directly contributed to the increased costs incurred by home builders.
The regulator disclosed that investigations into the alleged price-fixing allegations began in 2020 after multiple complaints were lodged by developers. During the interim, it conducted a series of raids at specific companies to ascertain whether the allegations were true.
CAK confirmed that the businesses collaborated to maximize their profit margins. According to reports, the companies agreed not to import raw materials to stabilize prices and product specifications.
According to the Kenya National Bureau of Statistics (KNBS), the construction industry’s development slowed in 2022 due to a decline in cement consumption and the importation of building raw materials.
The decline caused the industry’s growth to decline from 6.7% in the nine months leading up to September 2021 to 4.3% in the same period in 2022. During the same time frame, imports of iron and steel decreased from 274,134 tonnes to 198,849 tonnes.
“Businesses devise, implement, and enforce cartels to service their commercial interests and to the economic detriment of consumers. In this case, the steel companies unlawfully colluded on pricing, margins, and output strategies, according to Adano Wario, general director of the CAK.
“This is the most severe penalty ever imposed by the Authority, and it should send a clear message that cartel activity is prohibited under the Competition Act. In a liberalized market like ours, prices should be determined by the forces of supply and demand, devoid of manipulative business practices,” Wario added.
Before publishing its final decision and imposing the fines, CAK gave the companies multiple opportunities to present a defense.
“In May 2022, CAK interviewed the companies and their legal representatives and notified the parties of its proposed decision. “By the end of August 2022, all parties had submitted oral and written arguments,” stated Wario.
“The proceedings adhered to the principles of equitable administrative action. After examining the evidence and counterarguments, the Authority determined that the companies violated the Competition Act,” he added in an excerpt from his statement.
Last year, construction costs ranged from Ksh34,650 to Ksh77,500 per square meter, up from Ksh33,450 to Ksh72,400 per square meter in 2021, according to a report published in February 2023 by Integrum Construction Project Managers.
According to the report, the design of the home and the grade of the materials used necessitated the price increase.
According to the Architectural Association of Kenya’s Status of the Built Environment Report, taxes and inflation led to an increase in the cost of construction materials, including cement and steel.
Kenya Regulates Construction: 9 Steel Firms Fined Ksh338M
