Opportunity for EAPC in DR Congo

Opportunity for EAPC in DR Congo
04 February 2022

This week East African Portland Cement's (EAPC) Managing Director, Oliver M Kirubai, outlined the company's ambition to grow its cement business in the Democratic Republic of Congo (DRC). The pull of infrastructure projects and low installed capacity in DRC has not gone unnoticed by large regional cement producers as well as Chinese investors.

China has a historic vested interest in the DRC and struck several deals with former President Joseph Kabila, who held power from 2001-19, including the contentious minerals-for-infrastructure contract in 2008 for US$9bn. Congo's current president, Felix Tshisekedi, is seeking a fairer review of the Sino-Congo deals and said last year in a statement: "DR Congo is sorely lacking in infrastructure and this hampers its development."

In addition to the Chinese, the government of Uganda is also a partner for the DRC in constructing a new road network that will see three new road crossings between the countries. Each government is contributing 20 per cent of the US$330m projects with contractors and infrastructure developers raising the remainder.

Furthermore, following the displacement of more than 2m in the northeast of the country fleeing violence by armed groups despite the implementation of martial law, the need for housing is also driving cement demand to higher levels. 

EAPC's opportunity
Despite the country's problems, Kenya-based EAPC welcomed DRC's entry into the East African Community (EAC) regional bloc saying its population of 92m people offers a huge market for industrial products from Kenya. The company is attracted by the increasing cement consumption in DRC.

"Cement consumption in sub-Saharan Africa at the moment is 113Mt. In DRC, the demand would be lower but DRC instantly needs 10Mt of cement of which they don’t have such capacity to deliver," Mr Kirubai explained. 

"We plan a plant refurbishment to deliver operational excellence, and therefore contain production costs and enable us to venture into DRC and her environs."

DRC: developing the existing production base
However, the DRC is not without its own production of cement. The country has approximately 4.5Mta of cement capacity and has been developing its production capacity in recent years. However, in some cases this has not been entirely successful. 

HeidelbergCement operates the 0.435Mta Cimenterie de Lukala plant (CILU) but has not expanded its production in the country. The German multinational does operate two Interlacs grinding units, through its Scancem subsidiary, but they produce minimal amounts of cement under 0.1Mta.

A newer player is the 1.18Mta Nyumba Y Akiba (CIMKO) plant, established in 2016, which is a joint venture between Lucky Cement of Pakistan and Groupe Rawji of DRC. PPC Barnet is also a new 1.2Mta plant and has had to implement a restructuring plan after its difficult financial start.

The Carriére de Lualaba (CARRILU) plant in Kolwezi, Lualaba province, owned by the Chinese Zijn group, recently added 0.495Mta of domestic cement capacity.

Meanwhile, La Grande Cimenterie du Katanga (GCK) is a 1.2Mta greenfield integrated plant that has just entered service and is owned by HMIE group and West China Cement. Less successful has been the 1Mta Cimenterie de Maiko (CIMAIKO) project, in Kisangani, which is currently on hold. 

Such is the need for increased cement supply that in 2020, it was also reported by DRC's Industry Minister, Julien Paluku, that the government would consider an urgent revival of the 0.3Mta National Cement plant (CINMAT) having inspected the former site of operations. Nova Cimangola SA bought a 53 per cent share in CINMAT in 2012.

"I saw the quarry, the capacity of which is estimated at 18Mt of limestone with 60-year exploitation potential. But the production tool has been stopped since 2011. The government will receive the report that I will produce to motivate the urgent revival of this production unit," said Minister Paluku. 

Imports and the race to build capacity in DRC
The DRC has relied on imports to meet its cement demand of around 2Mta. In September 2020 DRC Minister of Foreign Trade, Jean-Lucien Bussa, authorised a 100,000t cement import from Brazzaville, Congo Republic, to ease the shortfall in cement supply in DRC, but the need of the 13 provinces is estimated at about 0.4Mta of imports, according to GCR14 and Kapital Afrik.

The DRC integrated with the African Free Trade Zone (AFTZ) in January 2021. This brought custom barriers down for African countries trading with DRC. The government has sought to reconcile the need to protect the domestic cement industry while meeting its obligation to the African Free Trade market.

To date DRC has mainly been reliant on Rwanda's Cimerwa plant for cement imports as the factory is situated in Bugarama, Rusizi, near the DRC border. Now, Kenyan cement producers are looking for an opportunity to enter DRC's market as trade opens up.

Therefore, EAPC will have competition not only from existing DRC producers but also from Kenyan cement producers such as Savannah Cement that are already supplying the DR Congo. "We are already supplying the Eastern part of DRC with our product. Eventually, we will have a presence in DRC," said acting Savannah Cement CEO, Samson Shivina. 

As the DRC opens up to free trade, cement is one of the goods that is likely to flow into the country while there is a shortage. Local producers continue to ramp up capacity, but operational challenges mean that utilisation rates remain low. In the meantime, supply from Kenya and other regional surplus markets will continue to penetrate the market. One challenge for importers which will favour the local players is the lack of good infrastructure in the DRC, which makes distribution difficult in many areas. Furthermore, the continued mobility of armed groups in DRC makes it a hazardous place to live and work in. The country faces many economic and political challenges, but the long-term outlook is positive.

Published under Cement News