IFC commits Sh9.7 billion in National Cement expansion

National Cement chairman Narendra Raval. FILE PHOTO | NMG 

By VICTOR JUMA

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Summary

• Firm angles for a bigger stake in regional market with the upcoming plants
• Once complete, the new plants will significantly raise National Cement’s output, intensifying competition in a regional market that has seen depressed prices
• The expansion is expected to create 323 new direct jobs in Kenya and another 173 in Uganda.

The International Finance Corporation (IFC) is set to invest an additional $97 million (Sh9.7 billion) in National Cement in the form of debt and equity to fund the company’s construction of new plants.

National Cement’s chairman and major shareholder Narendra Raval is expected to simultaneously inject $103 million (Sh10.3 billion) in the expansion plan that will cost a total of $200 million (Sh20 billion).

IFC’s proposed investment is split into loans amounting to $90 million (Sh9 billion) and equity of $7 million (Sh700 million).

“This project involves construction of two grinding plants in Uganda and Kenya and one clinker line (with a roller press and 5,500 tonnes per day kiln) and eight megawatts power plant next to the first clinker line in Merrueshi, Kenya,” IFC said in an investment disclosure statement.

Once complete, the new plants will significantly raise National Cement’s output, intensifying competition in a regional market that has seen depressed prices from a growing surplus of the commodity.

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Low prices

The retail price of a 50-kilogramme bag of cement in Kenya, for instance, has dropped to lows of Sh510 from highs of Sh740 in 2008.

IFC says the company’s nominal clinker capacity will rise from 1.1 million tonnes per annum (mtpa) to 2.9 mtpa and cement grinding capacity from 2.1 (mtpa) to 3.0 mtpa in Kenya.

Its Ugandan sister company, National Cement Company Uganda, will introduce 0.8 mtpa new cement capacity.

Mr Raval told the Business Daily that he will also put up more funds to ensure that the firm’s current ownership structure is maintained.

“We are also providing our share of funding in this expansion,” he said.

READ: Cement makers eye higher output with renewed clinker imports

New jobs

Mr Raval and his family currently own 85 per cent of National Cement while the remaining stake is held by IFC (7.5 per cent directly) and 7.5 per cent (through a separate fund owned by the international financier).

IFC says it aims to create new jobs and further drive down cement prices, among other objectives in funding the expansion.

The expansion is expected to create 323 new direct jobs in Kenya and another 173 in Uganda.