Cement manufacturers brace for increased competition
THERE is cause for apprehension in the cement manufacturing business: Aliko Dangote , the billionaire Nigerian tycoon, has indicated that he intends to start a US$400 million cement manufacturing plant in Zimbabwe next year.
A local unit for that purpose, Dangote Cement Zimbabwe, has already been registered in the country as the mogul trains his sight on massive investment in the country that will include a coal mine and a power generation project. The total cost of the three projects is projected at US$1 billion.
The mogul declared during his visit to Zimbabwe: “We want to set up an integrated cement plant here that will be bigger than all the plants that we have. We look at setting up something that can translate into a million and half tonnes so that even when we continue to use cement, there won’t be a shortage of cement here. We will make cement available.”
The three projects, he said, would commence early next year but this would depend on the issuance of relevant permits, for which he said government had already promised to “accelerate” all approvals.
Government was quick to ensure he received all the requisite approvals for the projects, and a team of experts, which included geologists and lawyers, came into the country immediately after his visit for due diligence.
Although there has been silence on the planned project since then, government sources indicated work was taking place behind the scene to facilitate the planned investment.
The entry of Dangote into the domestic market would be good news for consumers of cement and cement products as prices are likely to fall due to competition. Dangote’s plant in Zimbabwe is expected to produce 1,5 million metric tonnes a year.
Before his visit to Zimbabwe, the Nigerian businessman had signed contracts with Chinese construction company Sinoma International Engineering to add 25 million metric tonnes across 11 countries. The Zimbabwean plant would help his group reach the next milestone of 100 million tonnes of cement capacity by 2020, Dangote indicated.
But the biggest effect of the Zimbabwean investment would be to trigger a fall in cement prices, as the opening of a Zambian cement plant by the Dangote Group did a few months ago.
According to reports from Zambia, the opening of the Dangote plant, which created 7 000 jobs in Ndola, resulted in prices dropping significantly; competitors had reduced their prices because Dangote’s cement had been launched very lowly priced.
Already, Dangote has already indicated that he is preparing to invest in another plant in Lusaka. The Lusaka plant will be similar to the one in Ndola, which has a 1,5 million metric tonnes per annum capacity and valued at US$400 million. It has a 30 megawatts coal plant to power the factory.
Local companies appeared to have started preparing for competition much earlier than Dangote’s surprise announcement of his plans to invest in Zimbabwe.
PPC Zimbabwe announced in 2013 that it intended to construct a new cement plant to service the Harare and central Mozambique markets. The new plant, it said then, would have a capacity of approximately one million tonnes of cement per annum and would coincide with the construction of a separate grinding facility in the neighbouring territory of Tete in Mozambique.
That plant has already started taking shape in Sunway City Industrial Park, and is no longer just meant to supply Harare and Mozambique; it will cushion PHL from any market assault from Dangote.
PPC, the largest cement manufacturing company in Zimbabwe, has completed the feasibility study for a proposed clinker plant in Mt Darwin, Mashonaland Central Province. PPC, together with support from its South African parent, has dedicated resources in Zimbabwe for new projects. The total cost of the projects is estimated at US$200 million.
Last year, PPC’s managing director, Njombo Lekula, said although the company was currently a dominant player in cement production in Zimbabwe, its position could suffer from increased investment in the sector by competitors who could seize its share of the export market.
“This is not a very good picture,” said Lekula, referring to new investments by rivals across the region.
While Dangote had moved into the neighbouring Zambia, Malawi’s Shayona Cement had invested US$61 million in a new cement production plant at Wimbe.
Mozambique had also made similar investments in the cement industry.
Zimbabwe unit of French-headquartered Lafarge Cement, which this year merged with Swiss-based Holcim International, is also increasing capacity ahead of an intensification of competition.
Much Masunda, the acting chairman, said the company continued “to invest in developmental projects”.
“As at June 30, 2015 the company has invested US$1,2 million in plant upgrades against a capital expenditure of US$5 million,” he said.
The company, which is the second largest cement producer in the country, announced last month that it would continue to make innovations and introduce new products that meet customers’ needs. This, apparently, was against the backdrop of an increasingly competitive environment.
The announcement was made as Lafarge, which is listed on the Zimbabwe Stock Exchange, introduced a range of new packaging brands for its products.
Among the distinctive features of the new packaging were clear labels indicating the recommended use of each type of cement.
Previously, these features were not written on Lafarge products.
“The dynamic nature of business will certainly absorb and drown those who are not willing to adapt to change,” said chief executive officer, Amal Tantawi.
“As an organisation, we appreciate that changes help us as an organisation to keep abreast with international practices. Being a dynamic brand has truly led to the birth of a new global leader in the building materials industry,” she said.
The smallest cement producer, Sino Zimbabwe, has invested US$20 million into its facilities and has reduced the price of its cement products to increase market share.
The company has also commissioned cement packers, dispatching machines and two silos.
The company would also introduce a new range of the 4,2 Portland cement as it seeks to improve its competitiveness.
“The 4,2 portland cement is still undergoing tests so as to improve its shelf life. We are currently building another workshop which will mainly focus on the new product,” said general manager, Wang Yong.
He said the company was targeting a 100 percent growth in output, pinning its hopes on the rise in demand of cement products in the construction sector.
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