Dangote Cement, which three years ago took East Africa by storm,
is facing a hard time in the region, especially after the recent
killing of three of its employees in Ethiopia. The cement maker is also
struggling with unfavourable policy changes in Tanzania.
Dangote’s
Ethiopia country manager Deep Kamara and two of his aides were shot
dead in the restive Oromia region, where the cement firm has had tense
relations with the local community.
At some point, things were so bad the firm was forced to suspend operations in August 2017 for a month.
Ethiopian
government agencies said Mr Kamara was returning to the capital from
the factory when he was ambushed by unidentified gunmen, who killed him,
his driver and personal assistant.
Carl Franklin, a spokesperson for the Dangote Group, was not immediately available for comment over the killings.
Disruption
The tragedy came barely two weeks after the cement maker
announced a 4.4 per cent drop in its pan-African operations (outside
Nigeria), largely attributed to disruptions by the civil unrest in
Ethiopia and a dip in sales in Tanzania.
The firm sold
2.2 tonnes of cement in the first three months of this year, lower than
the 2.3 tonnes sold in the same period last year.
“In
Ethiopia, sales at our 2.5Mta factory in Mugher, Ethiopia, fell by 16.7
per cent in the three months of 2018 as a result of continuing
disruption due to civil unrest in the Oromia region, as well as more
local challenges we are experiencing with the communities around our
mining operations in Mugher. As a result, we sold approximately 443Kt of
cement in the quarter, down from 532Kt over a similar period in 2017
with a market share of 22 per cent, meaning we remain the market leader
in Ethiopia,” the firm said in its latest financial results update.
In
response to the disruption, which cost it 10 days of shipments from the
plant, Dangote Cement said it had increased initiatives to improve
relations with the local community.
“With the
appointment of a new prime minister, we have seen a resolution of
regional political issues and roads are now clear, enabling us to
deliver to all markets without hindrances. In addition, we have reached
an agreement with local communities on royalties for raw materials, with
the intention that they be used to support local development
initiatives. The additional cost of these will be offset by increased
pricing, which we introduced during the quarter. The ex-factory price
across the quarter was $67 per tonne,” the firm said.
Mr Kamara’s killing might be an indication that all is not well with Dangote Cement’s operations in Ethiopia.
The EastAfrican
understands that the cement firm’s Ethiopian drivers have been on
strike for the past one month, which prompted Mr Kamara to head to the
factory to try to find a solution, before he was killed.
It
is understood that the local workers have for a long time had
labour-related issues with the employment agencies hired by the cement
manufacturer and this latest industrial action by the drivers was just
one of them.
Vandalism
In 2016, protesters attacked and vandalised the factory and several vehicles and machinery.
Last
year, the firm threatened to shut its operations if the Oromia
authorities did not reverse an order to cement makers to cede control of
some parts of their businesses to local youths. This saw the national
government intervene and the matter is still under deliberation.
In
Tanzania, Dangote is now banking on the country’s large infrastructure
projects that are driving construction activity, including the Dar es
Salaam- Morogoro railway, major road and bridge projects and commercial
housing.
In the first quarter of this year, the cement
maker’s 3.0Mta factory at Mtwara sold 123Kt of cement, which was 46 per
cent lower than sales for the first quarter of 2017.
“The
fall in sales was as a result of plant maintenance and shutdowns
pending the commissioning of gas turbines, to avoid unnecessary losses
at the plant, which stopped production for much of February and March.
The factory remained reliant on diesel gensets for electrical power,
which resulted in losses that weighed on pan-African margins,” the firm
said in its latest financial update.
The installation
of gas turbines, which were to start operation in Mtwara in March, was
again delayed and are now expected to begin to operate in late May or
early June, meaning that the firm’s second quarter results could be
lower than predicted owing to the higher operation costs of diesel
powered turbines.
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