Tanzania: rising costs bring Dangote plant to a standstill

Production at Dangote’s Mtwara plant in Tanzania was brought to a halt last week as the company has found itself embroiled in a political battle over the payment of incentives by the Tanzanian government, the Citizen newspaper reports.

The 3Mta plant was commissioned in October 2015 and Dangote has claimed to have made ‘strong market share gains’ according to its trading update for the first nine months of 2016. However, in the same release, the company admitted that a reliance on diesel power was subduing its margins.

Dangote successfully applied for a licence to construct a coal-fired captive power plant to supply Mtwara but later announced it would instead build a gas-based plant. However, after difficulties in securing a gas supply, the firm has returned to its original intent, expressing an interest in developing the Mbinga coal mine as a fuel source.

In its report, the Citizen spoke to a source within Dangote Cement who said that the company was frustrated at the lack of support that the Tanzanian authorities had given the firm in accessing natural gas, which is produced only a few kilometres from the Mtwara plant.

The newspaper also reports that Harpreet Duggal, Dangote’s country manager for Tanzania, told a delegation from the ruling CCM party that the company was spending TZS10bn (US$4.6m) a month on diesel fuel after the firm had been told it must pay ‘Dar es Salaam’ prices for its gas, despite being much closer to its source than the 542km-distant capital.

In a statement released earlier this week, Dangote said that talks with the government were ongoing into ways to lower production costs. However, the industry minister, when contacted by the Citizen, said that he had had no official communication with the firm over the matter.