Accelerated investment in Tanzania’s cement sector, led by Dangote Cement, which is owned by Africa’s richest man Aliko Dangote and Kenya’s Athi River Mining would push up Tanzania’s installed cement capacity to 9.4 million tonnes per annum in 2018. This would surpass Kenya’s installed cement capacity by 2018, which would be at 8.1 million tonnes per annum at the time.
This is according to analysts at the Standard Investment Bank (SIB), who made the projection in an East Africa Cement Sector report released in January 2016.
It comes even as cement consumption across East Africa is estimated to reach 17.5 million tonnes in 2019 due to a sustained boom in the construction and real estate sector.
In 2014, consumption in the East African countries of Kenya, Tanzania and Uganda is estimated to have stood at 10.16 million tonnes. Countries within the East African region are implementing massive infrastructure projects in road, rail and energy as they seek to boost their competitiveness and improve the ease of doing business.
“Improved economic activity and accelerated implementation of infrastructure, were the key drivers of the 13 per cent year on year growth in consumption (significant improvement from the decade low growth of 2.3 per cent year on year posted in 2013,” the SIB analysts said in their valuation report.
According to Bamburi Cement Group managing director Bruno Pescheux, the outlook for the year is positive more so with “projected and continued positive growth in all regional East African economies underpinned by a robust construction industry”.
Tanzania, Kenya’s neighbour to the south has commenced work on the $10 billion port and special economic zone in Bagamoyo, which will gobble up countless tonnes of cement. Completion of the port is tentatively set for 2025.
Kenya on the other hand is implementing the multi-billion shilling standard gauge railway (SGR) whose construction is 60% complete according to officials. The rail, which will link Kenya at the port of Mombasa to landlocked neighbours, Uganda and Rwanda and later South Sudan, has given a lot of business to local cement producers.
Last year, the SGR contractor, China Road and Bridge Corporation (CRBC) said it had signed a number of purchase agreements with major cement manufacturers in Kenya who would supply cement to the SGR contractor throughout the construction phase of the rail network. Some of the major beneficiaries of the deal are Bamburi Cement, Athi River Mining, East African Portland Cement and Savanah Cement, with over 150,000 tonnes having already been procured by mid 2015, less than a year after the construction of the SGR began.
Uganda on its part is expanding the Kampala-Entebbe road into a dual carriageway. The project will ease the traffic gridlock experienced along the highway that leads to the country’s Entebbe International Airport.
Besides the government, the private sector is also expected to drive demand especially with the ongoing housing boom in Kenya and other regional countries.
“While we expect the private sector to continue driving consumption, realisation of forecast growth remains heavily dependent on timely execution of government-led infrastructure projects. We also assume key economic drivers will not deteriorate further,” the SIB analysts said.
Even as cement companies are set to reap big from the expansion in infrastructure and construction sectors, competition continues to intensify. Equally, the export market, which has been part of Kenya’s cement firms’ cash cow, is expected to shrink as more cement firms establish operations in the regional countries. It was anticipated that between 2015 and 2018, new cement grinding capacity totaling 5.2 million tonnes per annum would be commissioned in Kenya, Tanzania and Uganda.
Tanzania would account for all the new capacity pushing the country’s total installed capacity to 9.4 million tonnes per annum. For the first time in the history of East Africa’s cement, Tanzania’s installed cement capacity by 2018 would surpass Kenya’s. By 2018, Kenya’s total installed cement capacity would stand at 8.1 million tonnes per annum.
Due to increased foreign investments in Tanzania’s cement sector, 53.2% of the country’s total installed grinding capacity would be controlled by new entrants namely, Lake Cement with a 5.3% market share and Dangote Cement with 31.9%. Kenya’s Athi River Mining cement would control 16% of the cement market in the country.
Analysts indicate that for the first time in a decade, Mbeya Cement, which is controlled by Lafarge-Holcim (that also controls Kenya based Bamburi Cement) is expected to commission 0.7 million tonnes per annum of new capacity.
In April last year, Athi River Mining commissioned a 1.2 million tonnes per annum capacity clinker line in Tanga. Still in 2015, Dangote and Lake Cement announced the launch of 3 million tonnes per annum capacity and 0.5 million tonnes per annum capacity cement grinding plants in Tanzania.
In 2014, an estimated 18.4% (equivalent of 2 million tonnes) of cement produced in Kenya, Tanzania and Uganda was consumed outside of the region. However, amplified capacity largely by South African and West African cement firms in major inland Africa export markets such as Uganda, Rwanda, the Democratic Republic of Congo, Tanzania and Zambia is set to cut export volumes from the EAC region.