The price of cement in Tanzania has risen from $10 to $14 a bag in the past one month with shortages being experienced in some areas of the country.
The shortage and price increase, which has affected construction activities, are attributed to huge demand for cement in the Great Lakes region countries — the Democratic Republic of Congo, Rwanda, Burundi, Malawi and Zambia — where cement fetches higher prices.
Klaus Hvassing, chairman of the Tanzania chapter of the East African Cement Producers Association, told The EastAfrican that fuel hikes and demand for cement from dealers in the Great Lakes Region are the main cause of price increase in Tanzania.
Mr Hvassing said the price had increased even though cement manufacturers have neither increased their ex-factory prices nor exported to the Great Lakes.
“Once manufacturers sell their products to dealers and retailers, they have no control over where or at what price the retailers sell the product,” he said.
Some dealers have also increased prices to absorb the increase in transportation costs caused by increased fuel levies in this year’s budget and because of the poor state of transport infrastructure.
Tanzania’s cement prices are expected to increase further if the government does not take appropriate measures to revitalise the privatised Tanzania Rail Ltd (TRL).
Tanzania has three cement companies — Tanzania Portland Cement Company (TPCC), Tanga Cement Company Ltd and Mbeya Cement Company Ltd. They have the capacity to produce 1.7 million tonnes of cement annually.
Construction demand in Tanzania is projected to rise by 12 per cent this year. The managing director of Tanga Cement Company, Juerg Fluehmann, said that in some Tanzanian markets, there is increased demand for cement due to an increase in construction activities.
Mr Fluehmann said some traders are taking cement to the DRC and Zambia because of the high price it fetches there — up to $400 per tonne.
“Cement prices are a function of demand and supply. Because of the increased demand, some cement retailers are using this window of opportunity to increase prices on their own accord in some regions,” he said, adding that Tanzania’s manufacturers have not increased prices.
However, the manufacturers are attributing the price increase to fuel costs and lack of good infrastructure.
“Power quality and transport infrastructure remain a major issue. We need government support to place the priority on improving infrastructure and correcting the tax regime on fuel,” Mr Fluehmann said.
The construction of houses and other infrastructure facilities in Tanzania has pushed up cement production, which reached 410,000 tonnes in the first quarter of this year.
The quarterly production was a 9.2 per cent increase compared with the previous three months, according to figures released by the Tanzania Chapter of the East African Cement Producers Association.
In 2005, Tanzania produced 1.6 million tonnes of cement.
The managing director of Mbeya Cement Company, Ravi Iyer, echoed Mr Fluehmann (see Q&A) when he said increases in fuel prices, unreliable power supply, poor rail, road and port infrastructure as well as the devaluation of the Tanzania shilling have contributed to the increase of cement prices.
Mr Iyer said cement manufacturers try as much as possible to run their plants at high efficiency and capacity utilisation to minimise the cost of cement.
Tanzania’s annual cement production was only 815,000 tonnes in 1999, rising to 1.14 million tonnes in 2002 because of demand from gold mine development, infrastructure works and large construction projects.