Bamburi Cement and Athi-River Mining are locked in a vicious row over a Kitui limestone deposit, which is seen as crucial to grow Kenya’s economy.
A fresh tussle between local cement manufacturers - Bamburi Cement and Athi-River Mining Limited (ARM) - over interpretation of a court ruling could deny the country Sh12.6bn in new investment and block the creation of 2,500 new jobs.
Lafarge, which owns a controlling stake in Bamburi early this year gave the local subsidiary a go-ahead to spend up to $200m (Sh12.6 billion) to put up a new plant in Kitui, but has since reportedly grown cold feet following the new development that threatens to scuttle the venture which could otherwise deepen its presence in the regional market.
Although Bamburi remained non-committal about Lafarge’s threat to pullout, a director with the company confirmed it had indeed been granted the money for the new plant, but the firm is unable to move forward.
"We don’t want to reveal more for now, but it’s true Lafarge gave us Sh12.6 billion for the new plant because they understood its importance," said the director.
Lafarge first agreed to give out the money after the High Court ruled in favour of Bamburi after hearing conflicting claims to a limestone-mining site by both Bamburi and ARM. ARM, which the MD, Mr Pradeep Paunrana, spearheaded to become a key player has since gone to the Court of Appeal seeking for a stay of execution of the court ruling pending the outcome of the appeal.
But ironically, Bamburi, which is a major industry player apparently has some equity stake in ARM, the firm that seems to be holding it back. French cement conglomerate Lafarge has a 41 per cent stake in East African Portland and 15 per cent in ARM Ltd and a controlling stake in Bamburi.
The new location is the focus of a battle between the two firms and tends to offer an ideal harvesting ground to grow their figures. In addition, the limestone site that is close to the Mui basin, Eastern Province, has enormous coal deposits, which makes it economically significant to the investors. With the soaring energy cost - fuel and electricity - coal stands out to be the cheapest as well as most reliable and efficient source of energy that the new plant would heavily rely on to cut on production costs.
Currently, both companies are importing coal from South Africa which is a major contributor to high cement prices in the country.
High freight charges of importing coal contributes to more than half of the total production cost and is an obviously key determinant that influences consumer prices.