Written by George Omondi | From Business Daily

Egypt has significantly cut billions of pounds worth of subsidies that kept energy prices at rock bottom levels, raising production costs for its manufacturers.

The move offers Kenyan industrialists some relief from cheap consumer goods imported from the North African nation.

Egyptian President Abdel Fattah al-Sisi last Saturday ordered deep cuts in petroleum and natural gas subsidies, raising their prices by up to 78 per cent. The cuts are part of measures to plug Egypt’s huge budget deficit, which has grown in the past three years as political turmoil destroyed economic activity.

The new energy price list has set the price of natural gas at Sh700 per million thermal units for the cement factories and Sh610 for the iron, steel, aluminium, copper, ceramic and glass industries or nearly double the previous prices.

The rise came just days after the month-old Sisi government raised electricity prices at the beginning of July. The prices, which have long remained below the cost of production, are set to double over the next five years.

The changes are expected to affect imports from Egypt into Kenya. The two countries are members of the 19-country Common Market for Eastern and Southern Africa (Comesa) bloc, which allows preferential terms of trade. They also have a free trade area (FTA) pact that allows for exchange of goods without payment of duty.

Firms such as Colgate Palmolive and Procter & Gamble have taken advantage of the FTA arrangement to move their manufacturing operations to Egypt where they cheaply produce items like toothpaste, washing powder, sanitary towels and diapers for shipment to Kenya. Such goods only have to meet a 35 per cent local value addition rule.

Kenyan industrialists described removal of Egyptian subsidies as a game changer for local firms.

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