Cement industry woes worsen
…As Dangote Cement imports saturate market
By Marcel Chimwala
There is growing frustration among local cement manufacturers as massive importation of the product has pushed the industry off its rails threatening the future of investments that have continued to relieve more desperate Malawians from the bondage of unemployment.
The situation has worsened following the move by government to continue granting cement import licences to local distributors who are mostly ferrying Dangote Cement from neighbouring Zambia despite pleas from local cement producers to suspend the process to protect the local investments.
Managing Director for Cement Products Limited, Aslam Gaffar, told Mining & Trade Review that he is now tired of pursuing the government on the issue which has a knock on effect on the company’s plans to commission a new clinker plant in Mangochi where it has mineral rights over a limestone deposit.
We have been talking about this for over two years now and nothing has changed so let the government do what they want to do. Maybe their plan is that there should be no manufacturing here and Malawi should be getting cement from Zambia,
Managing Director for Shayona Cement, Jitendra Patel, said it is imperative for the government to control cement imports and support local investments such as the expansion of the Shayona factory in Kasungu if the country is to achieve socio-economic development.
He said besides providing employment to Malawians, the cement companies support the government in a number of ways including the provision of social amenities as part of corporate social responsibility programmes.
The government has to appreciate our role as a partner in development and protect our investments. It has to understand that by encouraging cement imports, it is exporting jobs to those cement producing countries and this is retrogressive at this time when all the countries are fighting to retain jobs,
The Government has, however, defended its decision to introduce licences for cement importers saying the move is important to protect consumers in a monopolized local industry and to prevent smuggling.
Spokesperson for the Ministry of Industry and Trade, Wiskes Mkombezi, said the coming in of imported cement has levelled the playing field in so doing ensuring that the product is sold at competitive prices for the benefit of the consumers.
The Ministry is encouraging business persons to import cement and pay duty in order to promote competition in the industry and ensure that prices are affordable to consumers,
He, however, lamented the problem of cement smuggling which he said is distorting the health situation on the market and robbing the government of revenue accrued from payment of import duty.
But industry analysts dismiss government’s assertion saying there can never be healthy competition between cement produced in different environments.
The production cost in Malawi is higher than in most of the neighbouring countries due to different variables so it is unfair to let locally made products compete at the same level with the imported ones,
said Coordinator for Malawi Chamber of Mines and Energy, Grain Malunga.
Malunga explained that in countries like Malawi where cost of production for cement is high due to environmental factors, there is need to guard against unfair competition such as “dumping” of foreign cement products.
Profit margin for cement sales are less and there is need to have access to cheap power, high quality limestone and proximity to good markets and other raw materials which are not always readily available in Malawi,
He, therefore, advised the government to deal with the issue of cement carefully observing that the industry is very sensitive to legal and regulatory instability.
Despite the turbulence on the market, Malawi’s cement companies continue to invest in projects to improve their service delivery.
For instance, Shayona is constructing a new state of the art cement plant in Kasungu, Cement Products Limited is pursuing plans to set up a clinker plant in Mangochi while La Farge Holcim Malawi has launched a new state of the art cement filling machine to improve service delivery.
Our continued hunger to improve service delivery emanates from recognition of the existence of competitive business environment which moves the company to always strive to benchmark with other competitors to maintain our foothold-grip on our long-standing status as the world’s best cement producer,
said La Farge Holcim Malawi Managing Director Ilse Boshoff at the launching ceremony of the German-made Roto packer that was held at the company’s premises in Blantyre.
But investigations by Mining & Trade Review indicate that the local companies continue to lose their market share to the Dangote group, which is spreading its wings in Africa.
Our visit to shops in Lilongwe unearthed that suppliers of Dangote Cement, which is commonly found in the capital city, are offering lower prices to customers mostly contractors who buy the cement in bulk as a way of outdoing their competitors.
The Dangote group is owned by Nigerian billionaire Aliko Dangote, Africa’s richest man who reportedly met President Arthur Peter Mutharika in UK, and was invited to attend the Malawi Investment Forum held in Lilongwe in 2015 only to fail to turn up at the 11th hour.
In Zambia, the prices of cement fell sharply when the Dangote brand entered the market triggering a myriad of speculations that the billionaire deliberately subsidizes production costs to offer low cement prices and kill off competition.
The Dangote group owns a 1.5-million tonnes per annum cement plant in Ndola, Zambia, a 3-million tonnes per annum cement plant in Mtwara, Tanzania and is also planning investments in Zimbabwe.
Meanwhile, imported Dangote Cement is flooding the Zimbabwe market and press reports indicate that local producers including LafargeHolcim, Sino Zimbabwe and Johannesburg-based PPC Limited are calling upon the Zimbabwean government to impose a tariff of up to US$50 per metric tonne on imported cement produced at lower costs in neighbouring countries.
Dangote Fact File
With an estimated net-worth of $24.5 billion (Bloomberg, 2014), Aliko Dangote has emerged as a self-made billionaire on a continent filled with abject poverty.
- Dangote was born on April 10, 1957 in Kano State, Nigeria. He was raised in a wealthy merchant family which specialised in the kola and groundnuts trade.
- From an early age, he always had an interest for business, selling boxes of sweets to people while in primary school.
- He is a graduate of Al-Azhar University in Egypt with a degree in Business.
- Back then, his trading firm was financed with a loan of US$3,000 which he borrowed from his uncle. The business focused primarily on the importation of soft commodities – sugar, salt and flour. This was notably at a time when the Nigerian military government exercised tight controls on the economy, illustrating Dangote’s doggedness.
- Today, that same small trading firm has emerged to become a Pan-African conglomerate worth trillions of naira. Countries of operation are 15 in total including Benin, Togo, Tanzania and of course, Nigeria. At home, his publicly listed companies reportedly account for one-third of the Nigerian Stock Exchange.
- The conglomerate consists of Africa’s biggest cement producer and the world’s third-largest sugar refinery. He also has stakes in the telecommunications industry, building 14,000 kilometres of fibre optic cables nationwide.
- He has big plans to set up a crude oil refinery in Nigeria, a much-needed solution to the oil-rich nation’s dependence on petroleum imports. The project would also lead to production of fertilizers and polyprothylene, used for plastics.
- Dangote has received several accolades over the years in recognition of his achievements. These include Forbes Africa Person of the Year award in 2014. He was also ranked as #71 on Forbes Most Powerful list in 2015, #51 on its 2016 list of billionaires.
- The 58 year old is happily married and the proud father of three daughters – Zainab, Salma and Halima.
The article above was initially published in Malawi’s Mining & Trade Review Issue Number 45 that is circulating this January 2017.