UGANDA: High cement prices hurt construction

The construction industry is feeling the strain of a recent price rise in the cost of building materials, which some fear could have negative effects on the country’s fastest growing sector.

The Uganda Bureau of Statistics (UBOS) reports that cement prices went up by 11.2% between July and August this year, following on the trend set by steel bars and paint, whose costs also rose by 3% and 1% respectively.

Consequently the same UBOS report indicated that the price rise caused an increase in construction costs. Non-residential buildings such as shopping arcades and office buildings were the most affected, registering a 0.9% increase in cost.

The cost of putting up a residential building also saw a 0.5% rise. Supplies of materials also saw a dip with cement alone dropping by 8% in August, compared with a 22% increase the month before.

UBOS attributes the dip to decreased imports of cement, due to the appreciation of the dollar against the shilling. The dollar is now trading at Shs 2,251.

Experts fear that the increase in the cost of construction materials could have a ripple effect as this has been the fastest growing sector in the economy, with growth rates of over 13% per annum, over the last two years alone.

The Managing Director of Sadolin Paints Chris Nugent said that the recent increase in prices is bound to affect other areas of construction.

“We know for a fact that this will affect investments in other areas of construction,” he said. However, he maintained that plans to build a $5million (Shs11billion) factory in Namanve were still on track, as it was planned to increase production by 50%.

One of those directly affected by the recent price increase is Ronald Ssegawa of Rona Estates in Ntinda, who says the increase in prices is pinching deeper into his pockets.

“The final cost of cement, which is now at Shs 24,000 a bag, if you are buying in bulk, has affected our output. It was at Shs 21,000 per bag when we started early this year so the cumulative cost is digging into our margins,” he said.

Ssegawa also warns that the increase has serious consequences on those who borrow money to build homes or who operate within small budgets. “If you are unfortunate enough to stall midway, you could find your costs have doubled by the time you resume construction,” he said.

For their part, cement manufacturers, Tororo Cement, admitted in July when the statistics were collected that their prices had gone up as a result of high operating costs.

However, Tororo Cement Marketing Manager K. Banargi said they were planning to announce lower prices in the next two weeks. “We are going to reduce our prices even further due to the increasing competition in the market. We want to be the most affordable product in the market,” he said.