Corporate News
The entry of Dangote Cement—owned by Africa’s richest man Aliko Dangote—
is set to further raise competition and cut margins in the local and
regional cement market. Photo/FILE
AFP
By VICTOR JUMA
In Summary
- The entry of Dangote Cement—owned by Africa’s richest man Aliko Dangote— is set to further raise competition and cut margins in the local and regional cement market.
- Dangote is widely tipped to either invest in Kitui or the Coast where vast amounts of limeston
The government has issued an operating licence to Nigeria’s Dangote Cement, paving the way for the conglomerate to establish a $400 million (Sh34.4 billion) plant and crank up the pressure on existing producers.
Mining secretary Najib Balala announced this Tuesday at a press briefing where ministers gave accounts of their operations.
The entry of Dangote Cement—owned by Africa’s
richest man Aliko Dangote— is set to further raise competition and cut
margins in the local and regional cement market.
Industry sources said two plants are coming up in
Rwanda, three in Dar es Salaam and Arusha, one in Burundi and another in
Jinja, Uganda.
Industry statistics show that cement prices have
shrunk to a 12-year low due to the glut caused by new players. Analysts
have linked the sharp drop to a price war that has intensified with the
entry of new players such as National, Savannah and Mombasa.
Dangote is widely tipped to either invest in Kitui or the Coast where vast amounts of limestone and other relevant minerals are plenty.
“The investment is fine if they follow the same
process as others: there are a lot of community issues but if they play
on a level playing ground without getting special status that is
alright,” said Pradeep Paunrana, the Kenya Association of Manufacturers
incoming chairman.
Mr Paunrana is the CEO of ARM Cement
that plans investing in Kitui. He also hoped the firm would not operate
as an offshore investor and tilt the balance in terms of tax payments
against others.
ARM hopes to invest billions to start construction
of a plant in Kitui to produce 8,000 tonnes of cement daily. Other
established Kenyan cement firms are also expanding their production.
“While new entrants have succeeded in using
discount pricing as a tool to segment the market, it is only a matter of
time before intense rivalry cuts across the entire market,” Standard
Investment Bank (SIB) said in a research covering the cement industry.
SIB said the outlook for cement firms’ margins was
disappointing, noting that the industry’s margins hit an all-time low
of 22.1 per cent in 2012.
vjuma@ke.nationmedia.com
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