The Sunday Mail
LOCAL cement manufacturers are unnerved by the prospect of an imminent investment from Dangote Cement, a business that is owned by Africa’s richest man, Mr Aliko Dangote. Instead they feel that such an investment will bring healthy competition and innovation. Dangote Holdings, which is also considering investments in local power generation, has since been registered.
But of all the company’s business units, it is Dangote Cement that has a much more visible footprint on the African market, having constructed cement plants in countries such as Kenya, Zambia, Senegal, Niger, Mali, Cameroon, Cote d’Ivoire and Ghana.
Currently, Dangote Cement has a 1,5 million metric tonnes per annum plant (mmtpa) in Senegal; 1,5mmtpa in Zambia; 1,5 mmtpa in Tanzania; 2,2 mmtpa in South Africa; 1,5 mmtpa in Congo Brazzaville; 1,5 mmtpa in Ethiopia and a 1,5 mmtpa (grinding) in Cameroon.
The cash-rich firm also has terminals in Ghana (3 mmtpa), Sierra Leone (0,5 mmtpa), Ivory Coast (1 mmtpa) and Liberia (0,5 mmtpa).
About $400 million will be spent to establish a 1,5 mmtpa cement plant in Zimbabwe.
Local producers have a combined capacity of 2,1 million metric tonnes per annum, with PPC Zimbabwe accounting for just over one million metric tonnes, Sino-Zim Cement (700 000mt) and Lafarge Cement Zimbabwe (390 000mt).
They however feel they can hold their own against new competition.
PPC Zimbabwe managing director Mr Njombo Nekula reckons that fair competition is good for the consumer.
“The Zimbabwean economy can only benefit from foreign direct investment. What is not good for the country is importing product(s) from other countries which are produced cheap . . . that becomes unfair competition and is not good for the growth of the country’s manufacturing sector.
“Zimbabwe as a country will have to guard against that especially now that the neighbouring currencies are deteriorating against the dollar,” said Mr Lekula.
PPC Zimbabwe, which is wholly owned by South African parent Pretoria Portland Cement (PPC), is in the process of sinking $80 million to upgrade its plant in Harare.
Its Bulawayo plant is capable of producing more than one million tonnes, and it is envisaged that the new milling plant in Harare will add an additional 780 000 tonnes to production volumes.
“Once the Harare plant comes on line, we will reduce production in Bulawayo (and) PPC Zimbabwe will then have a combined capacity of 1,56 million tonnes per annum,” said Mr Lekula.
But local cement producers are battling an influx of cheap cement imports, particularly from South Africa, whose depreciating currency is providing an incentive for exporters.
It has also been a boon for local cement dealers who are importing the product at between R60 ($4,4) and R95 ($7) and reselling it at US$13 in Zimbabwe.
However, local producers have to contend with high tariffs for power, fuel, raw materials and labour that make the local product uncompetitive.
Said Mr Lekula: “Therefore competing with a producer that incurs their costs in South African Rand, Botswana Pula or Zambian kwacha can never be a level playing field. The result of these imports can only benefit the exporting country and destroy jobs in the local environment.
“By being a dollar economy, Zimbabwe runs the risk of attracting imports from the region and becoming a destination for exports. It is commendable that the Government is aware of this and has put in place measures to support local industry by managing the import of commodities that can be produced locally in Zimbabwe.
“Local manufactures also have a responsibility to utilise the support that the Government is giving by reinvesting in their production units by either modernising or replacement of old machinery to become more efficient and competitive.”
It is a concern that is shared by Lafarge Cement, which also has a South African parent in Lafarge South Africa.
“As Lafarge, we insist upon the strictest adherence to the competition laws in the Competition Act of Zimbabwe and therefore we view competition as healthy for both our business and our customers. “Competition presents opportunities for innovative thinking and providing quality service to the customer,” explained Mrs Chiedza Mupfumira, Lafarge Cement communications manager.
Although local cement manufacturers are putting on a brave face, Dangote Cement’s investment in Zambia proved disruptive to that market.
Dangote Industries Zambia Limited’s price for its cement products, which it argues is 30 percent stronger than regular cement, was between 58,2 kwacha (US$6 using last week’s exchange rate) and 55,1 kwacha (US$5,6) per 50 kilogramme bag of cement, inclusive of Value Added Tax.
The national average price was however 81,58 kwacha (US$8,6) for the same quantity, according to the Central Statistics Office of Zambia. There were also reports that Zambia Portland in Ndola recently retrenched 47 employees, while an additional 63 jobs were also going to be shed. But local companies are confident they can stand the heat.
Lafarge indicated last week that it will continue with its planned investments.
“We remain committed to our customers in this market and in delivering products and services of the best quality and value. “The company has adequate capacity for the target market and this is supported by the planned investments. As Lafarge, we are driven by providing the best solutions to the needs of our customers and we will continue with planned investments in order to provide products and services of the best quality and value,” added Mrs Mupfumira.
Lafarge will soon upgrade its Harare plant to produce 450 000 metric tonnes per year from the current 390 000 metric tonnes at a cost of $20 million.
