from OMONDI OLOO in Nairobi, Kenya
Kenya Bureau Chief
NAIROBI, (CAJ News) - AN East Africa-based energy firm has invested Sh850 million (US$10 million) in a gas cylinder manufacturing plant in an attempt to end the region's over-reliance on imports.

Allied East Africa expects to tap into the growing demand for Liquefied Petroleum Gas (LPG) in Kenya and the region, currently dominated by imports.

The region imports an estimated 90 per cent of the gas cylinders with limited cost advantages.

The plant located in Kitengela on the outskirts of Nairobi has an optimum production capacity of 3,000 cylinders a day and is expected to start operations in June.

The firm will manufacture both industrial and domestic gas cylinders and market them to companies selling LPG, which includes oil-marketing companies.

Firms marketing LPG import bulk cylinders they sell in Kenya and the region.

The plant also has equipment to re-validate or repair worn out cylinders.

“The facility is complete and we are planning to start operations by June,” the firm’s managing director, Hamza Ali said in Nairobi on Tuesday.

He says the company is looking at tapping into the regional market where though use of LPG is still low, there is a potential.

“We will undertake production in Kenya and work with distributors in the other countries,” said Ali.

The firm is also looking at selling across East Africa Community member countries as well as markets like DR Congo, Somalia and Ethiopia.

He said the firm would adopt an agency distribution model where it would recruit distributors in the other markets.

A deal with a local financial institution has partly financed the setting up of the plant and the rest financed by Allied East Africa’s investors.

East Africa Spectre is among the local manufacturers in the region but has been unable to meet the huge demand.

Ali hopes that local manufacturing firms will over time grow to cater for up to 50 per cent of the gas cylinder needs in the country and region.

Allied East Africa is positioning itself to account for a substantial share of the market.

He said his company’s cylinder prices would be lower by as much as 20 per cent, mostly from saving on manual processes as the plant is heavy on automation.

The company will source for steel, which is the key raw material in the manufacture of gas cylinders, from China and India.