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TimePosted 16/04/2018 00:00:00

Zambia pushes on with cement growth

Zambia is currently seeing one of the most rapid growth rates in investment in cement capacity on the African continent. While the country has a cement demand of around 1.8Mta and a population of 15.9m, the build-up of its 3.6Mta cement production base may not only be due to positive domestic construction forecasts. Additional drivers are likely to be found across its borders.

This week has seen the announcement of yet another new 1Mta cement plant in Chilanga to be created by Weye Construction Materials Ltd, while further, smaller enterprises have reached the construction phase or are in the early stages of planning application.

The regular announcements of Zambia-based cement works have been hard to escape. The biggest project that has been announced is the 1.85Mta Central African Cement plant (Ndola Lime Co) in Masiti, which could be completed as early as the 1Q20. This facility is being funded by Zambia Consolidated Copper Mines Investments Holdings Plc (ZCCM-IH) and Sinocasonst, and will be located in the Copperbelt province.

In addition, the arrival of the 1.16Mta Chongwe plant by Sinoma Mpande Limestone Ltd is expected even sooner with commissioning scheduled this quarter. It is situated 49km southeast of Lusaka at Chiyyeya village.

Meanwhile, Dangote Industries Zambia Ltd is Zambia's market leader with its 1.5Mta integrated plant at Ndola and is currently looking to build another 1.5Mta plant at Kafues, Chilanga, to consolidate its market leadership.

Infrastructure investment
The expansion of Zambia's cement industry is partly fuelled by expectations of an infrastructure boom. Zambian Finance Minister, Margaret Mwanakatwe, said the economy is predicted to grow by four per cent in 2018, aided by the mining, agriculture and construction sectors. However, the government's spending spree has seen external loans grow to US$8.7bn.

But continued efforts to diversify the country's economy drives the government's reliance on building infrastructure such as the Kazungula Bridge that will connect Zambia to Botswana to enhance intra-regional trade.

Zambia is also in the middle of a national irrigation project to establish three hydroelectric dams at Mwomboshi, Chisamba district, Lusitu, in the south, and at Kafulafuta in the Copperbelt. The use of public funds invested in road infrastructure has opened up the Copperbelt and fuelled industrial development in the area.

Exports
While there are construction projects raising cement demand in Zambia much of the investment in new cement capacity is lured by opportunities for profitable export trade. Currently, only 20 per cent of Scirocco Enterprises' product is destined for the domestic market. Popular destinations for exports include Malawi and the Democratic Republic of Congo.

Furthermore, the country's is investing in the expansion of its export sector to additional destinations. Zambia Railways Ltd also signed a deal, in February, with South African freight logistics company Transnet, to buy a fleet of eight new locomotives and 600 wagons to move bulk cargo such as cement, copper, sugar and coal off the road network and on to rail for transport to South Africa.

Cement pricing
However, the build-up of capacity comes with a caveat for existing and would-be producers. Dangote Cement's entry to the Zambian market in 2015 has had a profound effect on the domestic price of cement. Following its launch, cement prices soon fell from ZMW90 to ZMW55 (from US$9.40 to US$5.70)/50kg bag. This trend could persist when additional capacity comes online, particularly if exports efforts are slow to bear fruit.

Moreover, cement pricing issues have already surfaced with the Competition and Consumer Protection Commission fining Lafarge Cement Zambia ZMW99m (US$10.4m) for alleged application of abusive loyalty discount schemes and price discrimination.

Board of Commissioners' Chairperson, Kelvin Bwalya, said in December 2017: "Lafarge Plc's pricing discriminated the domestic market against the export market and further applied discriminatory pricing for the Lusaka segment of the Zambian market. The company abused its dominant position and had excessively priced its cement on the domestic market."

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