Cheap imports pile pressure on E. Africa cement producers

Cheap imports pile pressure on E. Africa cement producers
Published: 30 June 2010

When the Indian conglomerate, Sanghi Group, launched the construction of its cement plant in West Pokot, Kenya, recently, they made known the market they were targeting.

Rajesh Rawal, the group’s managing director in charge of Africa investments, told top government officials led by Prime Minister Raila Odinga the Sh4 billion plant would produce additional 2.4Mt mainly for export to Uganda and Southern Sudan.

The first phase of the plant run by the group’s subsidiary – Cemtech Ltd – is expected to start operating next year while the project will be complete by 2014.

In Kenya, Sanghi’s investment represents the latest phase of a long running campaign by Kenya, and cement industry in particular, to win Uganda’s support in their bid to lock out cheaper imports from the region.

“In principle, almost everyone in the technical committee agrees that cheaper imports from Asia are hurting the existing cement firms but how soon we can take action depends on how fast we address Uganda’s plight,” says a government official who participates in the joint negotiations but would not want to be quoted discussing matters under wraps.

When the East African Community began to implement its customs union five years ago, cement was designated a sensitive product; it was to be protected from imports.

The negotiators from the region agreed to set a tariff rate of 55 per cent which was to be lowered gradually by 5 per cent every year to settle at 35 per cent.

At the time, EAC had only three members with only Uganda standing alone as the country which supported imports.

The admission of Rwanda and Burundi in 2007 — the other two landlocked countries which, like Uganda, do not have significant investment in cement industry — has since complicated matters for Kenya and Tanzania.

Upon admission, the two countries joined the side of Uganda in the campaigns to lower the external tariffs on cement to encourage imports, saying the local factories are either unable to meet the huge regional demand or are more expensive.

Under the EAC customs Management Act, the decision to alter the structure of external tariffs or exemption can only be reached collectively on consensus by the council of ministers.