In a bid to crackdown on the rapid rise in cement prices, cement producers should establish their own depots in remote areas so as to have the commodity's retail price reduced as the industry is projected to register growth this year due to the construction boom.
The Minister for Industry, Trade and Marketing, Dr Cyril Chami, said the time had come to ensure cement prices are uniform throughout the country.
"Although the manufacturing firms incur transport costs in shipping the product to the market, they dispose it at retail prices that are not affordable to the ordinary people," said Dr Chami.
He cited the case of Coca Cola which disposes of its drinks at same price in all the regions, saying this has been made possible with the availability of depot services.
"Cement manufacturers should emulate what the soft drink producers are doing by establishing their own depots so as to ensure equitable retail price of the products in all the regions," he added.
Minister Chami said that when cement industry estimated a tremendously growth in this year. According to one of the major producers in the country, TPCC, the development in the construction industry has shown future prospects that cement demand is going up rapidly.
A recent report conducted by the Tanzania Securities Limited (TSL), shows that cement industry is expected to grow further due to high demand from the construction industry which increased by 10% in five years.
"We expect demand to grow at 18% if the retail business, infrastructure development and mining investments are sustained and the economic momentum quickly return to pre-global financial crisis and its subsequent recession," said Moremi Marwa, the TLS's report analyst.
The report said the market share stands at retail (60%), business sector (20%) and infrastructure and mining sectors account for 20% respectively.
TPCC said besides the challenges facing cement production in Tanzania, it has managed to maintain its lead in the distribution and selling of cement products in the country.
According to the firm's marketing and sales director, Mr. Ekwabi Majigo, for this year only, the company distributed 6,200 tonnes of cement daily, a record in the cement industry in Tanzania.
As a result Mr. Majigo said the company was planning to modernize its marketing and distribution departments in order to extend their reach in the market. "Our target is to increase production as well as distribution by 11%. The number of distributors has also increased from 29 last year to 35 this year," said Mr. Majigo.
A survey by East African Business Week in Dar es Salaam last week revealed that the retail price of cement had slightly increased effective last month.
A price of the 50-kg sachet of cement has increased to Tsh15,500 (US$9.72702) from Tsh14,500 (US$9.09947) last year in Dar es Salaam only, while upcountry a goes Tsh16,500 (US$10.3546) depending on distance from the factory.
The increase was due to the hike in factory price announced by the TPCC early this year. The wholesale price for the 50-kg bag of cement at factory price stands at Tsh12, 439 (US$7.80609) up from Tsh11, 960 (US$7.50549) last year.
The TPCC attributed the price rise to the constant depreciation of the Shilling against the Dollar. "Higher production costs and use of the Dollar in natural gas procurement have led to increased cement prices, said, the company's managing director, Mr. Lesoinne Pascal.
Tanzania is still a net importer of cement, and, despite the recent up-cycle expansion of about 1.4 million tonnes, there are plans to increase capacity with 0.75 million tonnes -
Lafarge (Mbeya Cement) 0.25 million tonnes and Lake Cement 0.5 million tonnes in the next two years.
In Tanzania production capacity, currently at 3.01m tonnes, and demand of 2.1 million tonnes has had a Compounded Annual Growth Rate (CAGR) of 17% over a five year period to financial year 2010 which is relatively higher than the regional CAGR of 13%.
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