Bleak outlook for salt firms as revenue hits 36-year low

Revenue from salt production dipped to a 36-year low in 2018, wrapping-up a bad year for the industry which is battling billions of shillings in tax demands from the government.

The industry realised Sh19.4 million in revenue from salt mining last year—the lowest annual performance since 1982, data by the Kenya National Bureau of Statistics(KNBS) show. Salt firms earned Sh98.9 million in revenues in 2017—meaning earnings fell five times in 2018.

Production was equally subdued in the period with miners recording a 71.3 percent drop in output to 12,419 tonnes from 43,245.1 tonnes the previous year. The last time output was this low was in 2010 when 9,980 tonnes were mined.

Attempts by the Business Daily to get comment from salt manufactures were fruitless even though sources attributed the pitiable performance last year on uncertainty about tax demand by the State.

Last year, three firms– Krystalline Salt Ltd, Malindi Salt Works Ltd and Kensalt Ltd — were taken to court by the Water Management Resources Authority (Warma) for allegedly failing to pay taxes for using the sea water in mining the commodity.

The Water Act, 2002 and the Water Management Resources Rules of 2007 vest Warma with the power to issue water permits and charge for its use. The charges demanded from the three companies are for varied periods, for each of the company, but cover between October 2007 and March 2017.

Krystalline, a firm that commercially produces salt at Gongoni and Marereni on the Kenyan coast, lost an appeal to stop Warma from demanding Sh2.079 billion in respect of alleged unpaid water usage charges for the period between October 1, 2007 and April 19, 2017.

The Environment and Land Court at Nairobi had ordered Krystalline to pay the sum together with litigation costs and two percent compound interest on the sum.

The firm told the court that there was the real danger that its business would be destroyed, staff retrenched, operations shut down and its assets disposed of. Kensalt was also sued by Warma to pay Sh270.2 million for use of water in the course of salt manufacture while Malindi Salt Works was ordered to pay Sh7.56 billion.

The argument by the two firms that water is God-given and that no one can claim ownership or control of the sea water was thrown out.

The rulings meant increased cost of doing business for salt mining firms as they now have to start paying for use of water, a cost that they had not factored in before.

The added cost is, however, yet to reflect much on the retail price. A kilogramme of salt averages Sh25 while the smallest packet- 250 grammes- costs about Sh5.

Production of salt has been declining over the years. In 1988, the country produced 88,193 tonnes—which compared to last year translates to an 86 percent drop.

Salt consumption at homes has also been dropping, mainly on health concerns, as the World Health Organisation (WHO) pushes for no more than five grammes a day in adults.

This means, in a year, an adult should not consume more than 1.825 kilogrammes, being just about Sh36.50 cost going by Sh5 per 250-gramme packet.

WHO recommends that there should be no adding of salt during preparation of food. It is also against placing of a salt shaker on the table in restaurants. Further, it calls for limiting of consumption of salty snacks.

“Salt intake of less than five grammes per day for adults helps to reduce blood pressure and risk of cardiovascular disease, stroke and coronary heart attack,” says WHO.

“Key salt reduction measures will generate an extra year of healthy life for a cost that falls below the average annual income or gross domestic product per person.”

However, most people consume too much salt—on average nine to 12 grammes per day, or around twice the recommended maximum level of intake, according to WHO data.

WHO wants people to consume more fruits and vegetables that contain potassium if they are to reduce blood pressure.