The Competition Authority of Kenya (CAK) has fined nine steel companies Ksh338 million in a move to reign on high prices in the sector.
The penalties, which are the highest in the watchdog's history, were imposed after the agency received a report on an investigation conducted to ascertain whether the companies fixed prices, triggering hikes on construction materials.
Among the companies fined was Devki Steel Mills, owned by billionaire Narendra Raval. Others were Corrugated Steel Ltd and Tononoka Rolling Mills, owned by entrepreneur Dharmesh Savla.
Others are 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 misconduct of the companies directly contributed to high steel prices which has increased the cost of construction in the country.
The regulator detailed that the investigations into the allegation of price fixing began in 2020 after developers filed several complaints. It carried out a series of raids in specific companies during the period in between to determine if the allegations were true.
CAK ascertained that the companies coordinated to maximize their profit margins. For instance, the companies are reported to have agreed to skip the importation of raw materials to stabilise prices and product specifications.
According to the Kenya National Bureau of Statistics (KNBS), growth in the construction sector slowed down in 2022 on the back of decreased cement consumption and the import of building raw materials.
The decrease led to the contraction of the industry’s growth from 6.7 per cent posted in the nine months to September of 2021 to 4.3 per cent in the same period in 2022. The quantity of iron and steel imported declined from 274,134 tonnes to 198,849 tonnes within the same period.
"Cartels are conceived, executed, and enforced by businesses to serve their commercial interests and to the economic harm of consumers. In this matter, the steel firms illegally colluded on prices, margins, and output strategies," CAK director general Adano Wario alleged.
"This penalty is the highest-ever imposed by the Authority, and it should send a clear message that cartel conduct is illegal under the Competition Act. In a liberalized market like ours, the forces of supply and demand should signal prices, free from manipulative business practices," Wario added.
CAK allowed the companies to defend themselves on various dates before releasing its final decision and imposing the fines.
"CAK interviewed the companies and their legal representatives and issued a notice of proposed decision to the parties in May 2022. By the end of August 2022, the parties had made oral and written submissions," Wario stated.
"The hearings were in line with the tenets of fair administrative action. Upon reviewing the evidence and rebuttals, the Authority determined that the companies breached the Competition Act," an excerpt of his statement added.
Construction costs ranged from Ksh34,650 to Ksh77,500 per square metre last year, up from Ksh33,450 to Ksh72,400 per square metre in 2021, according to an Integrum Construction Project Managers’ Report released in February 2023.
According to the report, the hike was necessitated by the design of the house and the quality of materials used.
Architectural Association of Kenya’s Status of the Built Environment Report attributed the spike to taxes and inflation, leading to increased construction materials prices, including cement and steel.
In effecting the fines, CAK distributed the Ksh338 million fine among the companies as follows;
