How magadi firm shutdown threatens jobs, manufacturers and water sector

A section of Tata Chemicals Magadi Limited. [File-Standard]

The prolonged suspension of mining operations at Tata Chemicals Magadi (TCML) is beginning to send ripples across Kenya’s manufacturing sector. The suspension of operations by the government in July has put jobs at risk, disrupted production and fuelled concerns over rising costs as companies scramble to secure alternative supplies of soda ash and other essential products.

The shutdown has also reportedly put pressure on businesses along the Magadi supply chain and raised concerns over potential disruptions to water-treatment operations across the country.

Of particular concern to industry players is that the Magadi plant was closed without notice, leaving manufacturers and other users with little time to secure alternative supplies of critical raw materials.

Also, 1,000 people are employed by the manufacturer, with about 500 of them already affected by the shutdown.

TCML, which produces about 300,000 tonnes of soda ash annually, was suspended over alleged breaches of statutory obligations under Kenya’s mining laws.

Mining Cabinet Secretary Hassan Ali Joho said the suspension followed the company’s failure to meet requirements under the Mining Act, Cap 306, the Mining (Licence and Permit) Regulations 2017, the Mining (Royalty Collection and Management) Regulations 2024 and other applicable legal frameworks.

Among the issues raised are the absence of a clear mineral beneficiation and value-addition strategy, unresolved royalty reconciliation and payment obligations, and inadequate export reporting and reconciliation.

TCML said it had submitted documents addressing the seven issues raised by the Ministry of Mining, Blue Economy and Maritime Affairs and was awaiting the Government’s review.

“TCML recognises and respects the Government’s mandate to regulate Kenya’s mining sector. Throughout this process, the Company has cooperated fully with authorities and remains committed to responsible mining, environmental stewardship and regulatory compliance,” the company said.

But industry expert David Kimondo says the closure had exposed the vulnerability of manufacturers that depend on a strategic local source of industrial raw materials.

“The biggest problem is not only the closure itself, but the fact that the plant was closed without notice. Manufacturers operate on production schedules and supply contracts. When a major supplier stops operations abruptly, companies cannot immediately replace that supply,” Kimondo said.

The immediate impact is already being felt by manufacturers.

Dhaval Soni, managing director of Eastern Chemical Industries, which produces sodium silicate, said the company has been forced to operate below capacity and at a significantly higher cost due to low supply of soda ash. The factory also faces closure if it runs out of soda ash.

“We are operating below capacity with very huge costs on energy,” Soni said, adding that soda ash is a primary raw material in its operations.

Soni said the company had not maintained large stocks because Magadi had historically been a dependable local supplier.

“We do not keep stock because the raw materials are available in Kenya. Magadi has been very dependable,” he said.

He said that importing soda ash could take up to three months and would expose manufacturers to additional shipping, clearing, storage and foreign-exchange costs.

“Importation will affect forex reserves,” Soni said.

 Kimondo said the cost of importing the chemical should not be measured only by the purchase price.

“An importer has to consider the cost of shipping, insurance, port charges, clearing, transport, financing and foreign exchange. All those costs eventually find their way into the price of the finished product,” he said.

The effects of the shutdown are extending beyond conventional manufacturers to businesses supplying the livestock sector.

Kenneth Mwangi of Afric Salt Limited said the company sources crushed soda from Magadi, which is used to sanitise livestock paddocks and help control the spread of diseases.

Mwangi said the distributor was now completely out of stock, leaving the company uncertain about where to obtain alternative supplies.

“We are fully out of stock,” Mwangi said.

The situation has grown difficult, particularly because Magadi has effectively been the monopoly supplier of the product, meaning businesses had not established alternative supply chains.

“Magadi has a monopoly on the products. We do not know where to import the product from,” he said.

The shortage could therefore affect livestock farmers that rely on the product for sanitation and disease-control measures, adding another dimension to the impact of the Magadi shutdown.

The disruption is particularly significant because Magadi supplies soda ash to sodium silicate manufacturers. Sodium silicate is subsequently used by detergent and soap manufacturers, meaning its shortage could affect consumers down the production chain.

This, Soni warns, could affect the soap industry among many other sectors. The alternatives include sourcing soda ash from China, Turkey and other international markets. However, manufacturers say switching suppliers cannot happen overnight.

Other industries that could be affected by the closure are glass manufacturers, which heavily depend on soda ash as a critical ingredient in glass production. Industry sources say some companies have been forced to keep furnaces running without producing glass, while shutting down and restarting industrial furnaces can cost as much as $1 million (Sh129 million).

Samson Kiungu of Kihonge Transporters said the shutdown had left transporters with idle trucks, reduced revenue and lower incomes for drivers and crews.

The disruption has also affected contractors, suppliers, traders and other businesses dependent on the plant and its workforce.

A prolonged closure, Kihonge warns, could put further pressure on the local economy as money that normally circulates through the Magadi community declines.

Regional customers could equally be forced to look elsewhere. The company exports 67 per cent of its product to the Asian market, with the rest being consumed locally.

Perhaps the most sensitive concern is the impact on Nairobi’s water supply. Nairobi City Water and Sewerage Company relies on Magadi soda ash at its three main water-treatment plants, using more than 360 tonnes every month.

The chemical is used to adjust the pH of treated water and stabilise it against corrosion as water moves through the distribution network. A prolonged disruption could force the utility to source alternative chemicals, acquire new dosing equipment and increase water-quality monitoring.

Hydrated lime, which could be considered as an alternative, is not regarded as an equivalent substitute because it can cause scaling and blockages, pH fluctuations, increased turbidity and higher maintenance requirements.

The development therefore raises the possibility that what began as a mining and manufacturing dispute could eventually become a water-security and consumer-cost issue for Nairobi.

The company is awaiting an expedited review of its submissions and a clear pathway towards resuming operations.