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East African cement producers threatened by cheap imports

World Cement,

Cement producers in the East African countries of Kenya, Uganda and Tanzania are experiencing significant competition from overseas. Whilst unreliable and expensive power supplies and poor infrastructure development have pushed up domestic prices in a period of high demand, the economic downturn has resulted in reduced freight rates, making the region a prime target for low cost imports.

Local disadvantage
According to the General Manager at Uganda’s Hima Cement, David Njoroge, electricity prices in the country are four times that in China, putting local producers at an immediate disadvantage. On top of this, reports have surfaced that the government is licensing two further cement companies to set up in Uganda, which would put additional pressure on existing producers. Njoroge has pointed out that two of the three producers in Tanzania are on a temporary shutdown, having been pushed out of the market by cheap imports. He warns that a similar situation could occur in Uganda should the imports continue to go unchecked.

Bamburi: resilient
Meanwhile, Bamburi Cement has announced strong growth in the first half of the year amounting to a 49% increase in operating profit y/y. The Group’s Chairman, Richard Kemoli, told press: “The strong results over six months to 30 June demonstrates the group’s resilience, particularly in the difficult economic conditions spurred by global economic downturn, increased competition and the negative impact of the fluctuating rate of local currencies against major hard currencies.” He added that production costs grew by more than 50% in the period under review – largely due to surging fuel costs – but that this was partly mitigated by a 22.9% decrease in distribution costs, as a result of increased efficiency in the distribution system, and by a reduction in the purchase of clinker from Uganda thanks to increased productivity. The group has continued to make substantial contributions to charitable programmes in both Kenya and Uganda, where it is building a new Sh 7 billion cement plant. Although the first half results are good, Kemoli is cautious about the outlook for the remainder of the year, in part due to the influx of cheaper cement imports.

Government intervention
The onus is on local government to help domestic producers to increase competitiveness. In a press release issued jointly last month, East African cement producers called on governments to protect local industries by reviewing trade policies and taxation. “We have a choice of either helping our industries to become competitive or opening the markets and destroying what has taken many years to build,” said Njoroge.

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