By Sebastian Mrindoko |
Cement production is becoming an important manufacturing activity that would contribute immensely to Tanzania’s economic growth, in terms of exports and job creation.
The cement industry has of late seen more key players coming in, the move that would lead to increased production to make the country the largest cement producer in Africa. Locally, the situation will stir up competitions that would force prices to decline, to benefit the local consumption thus becoming an important incentive in encouraging construction activities.
Adjourning the 14th session of the National Assembly in Dodoma at the weekend, the Prime Minister, Mr Mizengo Pinda, said the cement industry has positive prospects to become the largest contributor of revenue to the government as well as job creation.
He said the current production capacity in the country is 3.8 million tonnes per annum, but it is expected to more than double to 8.3 million tonnes per annum in the near future. Domestic consumption is also projected to increase to 3.9 million tonnes per annum from 2.25 mtpa.
Premier Pinda said there are ongoing five cement mills construction projects in Arusha, Tanga, Lindi and Mtwara regions to make a total of nine cement projects which will make Tanzania the largest cement producer on the continent.
“To ensure that Tanzania exploits fully the huge potential in the cement industry, Premier Pinda said the government will act strongly in curbing importation of ‘cheap’ cement which have been contributing to killing the local industries and deny the country revenue,” he said.
Also, it is projected that construction of residential and commercial housing will continue to dominate local cement demand at around 85 per cent in the medium term. Construction and housing sectors will continue per same projections to be the main driver of cement consumption in the country.
Available reports from the cement producers show that by next year, Tanzania is projected to become a net exporter of cement – fully supported by projected strong demand from its (import dependent) neighbour countries of Burundi, Rwanda, and East DRC.
Even though the projections show a diminishing role of the mining sector (mine construction) in increasing demand for cement in the country, it is still foreseen an uptick of activities in other sectors (infrastructure and residential housing in particular).
Also the more key players enter into the cement industry, it is projected a decline in production costs (supported by falling energy costs and improving energy supply), and a decline in prices due to the expected entrance of new players (Lake Cement and Arthi River).
Factoring projected falling prices, it is also expected revenue growth to be largely driven by volume, riding on the expected increase in demand (internal and external) especially from neighbouring countries of Rwanda, DRC, and Burundi.
For example, the new Dangote Cement Factory now under construction in Mtwara, will be the biggest cement project in the country, East and Central Africa, is expected to ease pressure on prices of the product once the investment project starts production next year.
Mr Aliko Dangote, the Group President and Chief Executive Officer said during his visits to the country last week that when the plant starts work next year, the company would look at how to reduce pressure on the price of cement.
One of the measures he noted is to find ways of countering costs that arise as a result of distribution difficulties as one way of reducing pressure on cement prices.
The firm would first procure 250 trucks to handle distribution of the product across Tanzania. Similarly, to handle challenge of getting skilled labour in Tanzania for their operations, they would first take Tanzanian engineers to the Dangote Academy near Abuja for training.
The country is set to more than double its cement production capacity next year when the factory is completed. Currently, the price of cement per tonne remains relatively high averaging between 90 and 105 US dollars due to high energy costs and dependence on imported clinker.
The capacity of the factory is expected to be three million tonnes per annum, out of which he expects to get a good chunk of the market share. Mr Dangote hopes that the new cement plant would first satisfy the local market. Tanzania Portland Cement is currently the country’s biggest producer with a production capacity of 1.4 million tonnes per annum.
Comparatively, Tanga Cement has a capacity of 1.25 million tonnes per annum while Athi River Mining Tanzania produces 750,000 tonnes per annum. Mbeya Cement Plant has an installed capacity of 350,000 tonnes per annum. Alhaj Dangote is a Nigerian business magnate who is ranked by the Forbes magazine as 43rd richest person in the world and first in Africa.
According to the company, they have set a goal of becoming one of the world’s leading cement companies by 2016. The company’s investment profile in the continent stretches from Nigeria, Tanzania, Cameroon, Senegal and Gambia to South Africa, Zambia and Ethiopia, to name just a few.
This is an opportunity to exploit the comparative advantage in cement production that will bolster construction sector and its contributions to economic growth and job creation.