Cement production in East Africa is expected to rise sharply in the next three years due to investments by new entrants and existing players expanding to defend their market shares, heralding further price gains for builders.
Karsan Ramji & Sons Ltd, Dangote Group of Nigeria and Cemtech Ltd, a subsidiary of Sanghi Group of India, are among new entrants in Kenya working to complete their factories while Savanna Cement Ltd and National Cement Company Ltd are increasing their capacity.
Sector analyst Faida Investment Bank said Kenya’s cement production is expected to grow to 11.1 million tonnes per annum by 2017, a 53 per cent growth from 7.25 million tonnes produced last year.
“The firms need relatively high margins to sustain business models capable of tapping into emerging opportunities requiring capital-intensive expansion,” Faida Analyst Bernard Kiarie said.
He said the new entrants are able to undercut established firms because their plants employ modern technology, helping reduce costs. Key expenses in the manufacture of cement are energy for grinding clinker, freight of raw materials and importation of clinker for firms that do manufacture it, administrative and distribution costs.
A bag of cement in Kenya costs between Ksh700 ($8) and Ksh750 ($8.5). The price in Tanzania is $5.3-$6 plus 18 per cent value added tax and the cost of transport depending on distance from Dar es Salaam. Uganda’s average price was Ush32,000 ($12) as at December last year.
National Cement Company Ltd chief executive officer Narendra Raval has announced that the firm will spend $220 million, $70 million of which is a loan from International Finance Corporation, to increase cement output.
Karsan Ramji & Sons Ltd plans to build a $4.9 million plant at Athi River near Nairobi to produce 700 tonnes of cement daily.
Another firm, ARM Cement Ltd plans to spend $200 million to build a 2.5 million tonnes per annum plant in Kitui County in eastern Kenya.
ARM deputy managing director Surendra Bhatia said the company is expanding its production capacity in Kenya and Tanzania to meet East Africa’s growing demand for cement due to rapid infrastructure development.
Kenya’s per capita consumption of cement averages 55kg, Tanzania’s 45kg and Uganda’s 40 kg. Egypt’s per capita consumption is 506kg, South Africa’s is 230kg and Angola’s is 80kg.
ARM is set to commission a 1.5 million tonnes per annum cement factory in the limestone-rich Tanga town in Tanzania, at a cost of $200 million.
Dangote Cement is building a cement plant of 3 million tonnes per annum at a cost of $500 million at Mtwara in Tanzania that is expected to start production next year.
The East African
Cement prices vary as per the demand, its importance has been widely implemented as manufacturing unit in Kenya, Tanzana make it more helpful to the business around the place.
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