Economists give cautious welcome to Dangote cement price slashing

DAILY NEWS Reporter

ECONOMISTS have described the recent cement price reduction by Dangote Cement as the right move which will benefit consumer and stimulate construction works necessary to boost growth.

Speaking to the Daily News, in an interview yesterday, they gave a cautious welcome to the news about cement price reduction, saying it was good to consumers and the construction industry, at least in the short-term basis when “all other things being equal.”

However, they also cautioned over long-term effect that the move may be inimical to growth of the cement sub-sector. “All in all, it is a good move as it will help many people to erect permanent structures and stimulate the construction sector,” said Prof Humphrey Moshi of the University of Dar es Salaam.

He said it was good that the cement industry was witnessing price decline due to growing competition after the entry of new players.

Price reduction would boost cement consumption as it would be more affordable to consumers, he said adding that would help more Tanzanians to have more permanent structures.

He said other cement producers should emulate Dangote and bring down the price of cement, noting that there is no reason a bag of cement should cost so much.

Prof Honest Ngowi, from Mzumbe University, Dar es Salaam Campus said cement price reduction was good to consumers as it will reduce the cost of building and hence help people construct houses.

“The move is good depending on which side one is. For consumers it is good news as falling prices will reduce cost of building but it is not so good news to other producers,” he said.

He said cement consumers stand to benefit from the intense competition in the industry which have pushed down the prices but that serves only as short-term effects. “Normally in competition consumers are the winners and this will be the case here but it is not clear how other producers adjust to that,” he said.

According to him, consumers who are price sensitive may shift to Dangote cement, depending on quality, which may have negative effects to other producers and long-term repercussions in the industry.

Dangote Cement, the largest cement producer in Tanzania, slashed cement prices to 10,000/- per 50kg bag in a move seen to enhance competition in the local cement market.

Alhaj Sada Ladan-Baki, the group executive director of Dangote Cement said in a statement issued on Sunday that price reduction was in line with the company’s commitment to help in the development of infrastructure and boost the effort to reduce housing deficit in Tanzania.

He said the company had pegged the Dangote 32.5 cement grade at 10,000/- per 50 kg bag, while the higher 42.5 grade is to sell for 10,500/- per bag delivered in Dar-es-Salaam.

This step makes cement more affordable than it has ever been in Tanzania. The new prices represent more than 20 per cent discount on the prevailing market price of the product, which currently sells at 13,000/- in Dar-es-Salaam and higher prices across the country irrespective of the grade.

Ladan-Baki says that the move was in line with the company’s commitment to the dire need for development of infrastructure and to boost the effort to reduce the nearly 3 million housing deficit in Tanzania.

The Dangote Cement investment will certainly contribute to Tanzania’s on-going story of infrastructure development, job creation and broad economic development.

“We recognise the need for a dramatic increase in the response to the huge infrastructure and housing deficit in the country, and one of the ways of addressing the issue is bringing the price of building materials down to much more affordable levels, especially cement which is within our own control, as part of our own contribution to the agenda of President John Magufuli’s administration addressing the housing and infrastructure in Tanzania,” he added.

Dangote’s US$600m investment in Tanzania will further speed up infrastructural development and complement the government’s efforts in stimulating economic growth and creating jobs.

Dangote cement, the largest producers competes other producers including Tanzania Portland Cement, owned by a subsidiary of Germany’s Heidelberg Cement AG; Tanga Cement, majority owned by Afrisam Mauritius Investment Holdings Limited; and Mbeya Cement, owned by France’s Lafarge SA.