M a r k e t N e w s

East Africa: Demand for Cement in EA Remains Strong

Posted on : Tuesday, 30th June 2015

DEMAND for cement in the East African Region is anticipated to remain strong in the medium term, supported by the resurgence in infrastructure and housing sectors.

Also, apart from the associated energy costs and the availability of cheap imports from some Asian countries, demand for cement in East Africa has continued to rise.

The growing demand for cement is expected to boost investments in new cement production in line with the retrofitting of old cement plants and the expansion of existing cement production capacity.

Tanga Cement Managing Director Mr Reinhardt Swart said in an interview that there is huge potential of investing in the cement industry due to rising demand for the commodity in the region.

"Despite the increased cement plants in Tanzania and other countries in the region, there is still huge demand for cement to cater for increase investment in infrastructure projects," he said after receiving certificate recognising his company as one of the tops superbrands.

He said the award is sign of the efforts put by the company to maintain quality of the product that made customers to vote and give positive feedback.

Investing heavily on cement production was insufficient if the products are of low quality that does not meet market expectations and international standards.

Mr Swart said the sprout of many cement factories in Tanzania and the rest in the region was a challenge and opportunity to capitalise at the same time.

"It makes scrutinise at ways to remain in the market competing and raising the quality of the cement products," he said. He also shared the manufacturers and cement makers concern over increasing importation of cheap cement from China and Pakistan into East Africa, saying it is creating excessive competition in the market.

Leading cement producers with highest market share in East Africa include Twiga Cement, Tanga Cement, Bamburi Cement in Kenya and East Africa Portland Cement Co.

The sub-Saharan Africa's largest cement producer, Dangote, currently is building a 500-million US dollars cement plant in Mtwara Region, Tanzania. Overall, in East Africa, capacity additions by 2018 are expected to increase the region's cement capacity to 13.45 million [metric tons] per year.

Certain high-growth markets - such as those in the DRC , Rwanda, and Burundi - which are characterised by low cement consumption per capita, are expected to continue to grow and attract imports from cement manufacturers based throughout East Africa.

Key drivers for cement demand in East Africa are infrastructure development, urbanisation, high regional gross domestic product (GDP) growth rates, and high population growth.

"The increasing demand is fuelled by an upsurge in commercial projects, housing developments and mega government infrastructure projects, such as ports, railways and road-cement manufacturers, in East Africa," he said. Most countries from this group have had political instability, which has curtailed the development of the infrastructure and construction sectors.

The implementation of sustainable cost optimisation strategies focusing on alternate fuels, lowcost technology, and value-adding models are expected to reinforce the local producers' presence and competitive positioning in the East African cement industry.

Modernisation at the plants, improvement of plant processes, and absorption of the best practices in mining and manufacturing - in the pursuit of cost efficiency - is required if East African cement producers are to compare favourably to leading global cement producers in terms of profitability.

East Africa's average consumption is low and the process of catching up with international averages will drive future growth. The Democratic Republic of the Congo (DRC ), Kenya, and Burundi are expected to display the most rapid consumption growth.

Cement consumption per capita in East Africa is significantly below the global average of 500 kg, with the region's largest markets in Kenya (80 kg) and Ethiopia (61 kg) - both indicating significant potential for growth.

This reflects high domestic prices, which have constrained demand. By way of comparison, in sub- Saharan Africa, Nigeria remains the largest consumer, with an estimated 18.3 million MT consumed in 2013, followed by South Africa, with 12.2 million MT. Together these two countries represent half of sub-Saharan Africa's cement consumption.

Angola, Ethiopia and Ghana all together consume between 5-6.5 million tonnes while mile Kenya (3.7 million MT) and Tanzania (3 million MT) are East Africa's leading cement consumers.

The rapid expansion of production capacity across Sub-Saharan Africa has led to a sharp drop in cement imports, reversing the deficit that has built up over the past decade.

Nigeria, which as recently as 2010 was importing 500 million US dollars worth of cement each year, has seen imports slump to 139 million US dollars in 2012, while Ethiopia's imports have fallen by 75 per cent, to just 43 million US dollars over the same period.

This reflects the steady tightening of both countries' import regimes, where the governments are phasing out licences to import cement and encouraging investment in local production.

Source : allafrica.com
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