TANZANIA: Dangote Cement Consolidates with $600m Tanzania Plant

The recent inauguration of a 3mmta cement plant in Tanzania by Dangote Cement Plc will boost the company’s bottom line and increase returns to shareholders in the near future, writes Goddy Egene

When Dangote Cement Plc (DCP) declared its plan to make a massive expansion across Africa, many investors probably doubted the company. But the expansion programme is not only on track but is also moving faster than many stakeholders had expected.

Early this month, DCP inaugurated the Tanzania Plant, which is a three million metric tonnes of cement per annum (3mtpa) plant located in Mtwara, Southern Tanzania.

The Tanzania plant is the seventh integrated plant outside Nigeria and it followed that of Zambia that was inaugurated by Vice President of Nigeria, Yemi Osinbajo.

The plan of DCP is to create 16 cement plants across Africa to produce at least 80 million tons of cement and address the infrastructure needs of the continent.

In June, 2015, the company inaugurated its cement plant in Ethiopia, which was followed in August with the inauguration of two cement plants- in Zambia and Cameroon.

And October 10 witnessed the inauguration of Tanzania plant, while the next port of call would be Senegal and South Africa plants before the end of the year.

With the inauguration of the Tanzania plant, the bottom-line of DCP will be enhanced. Already, the half year results of the company had reflected the benefits of the expansion.

Benefits of Tanzania Plant

According to the President of Dangote Group, Alhaji Aliko Dangote, the company is currently consolidating its cement businesses across Africa to reap the benefits of scale, adding that its operational offshore cement plants have started to make substantial contributions to our group revenue.

He said the company’s Pan-African drive will aid the cement company’s plan to do a listing in London and Johannesburg in the near future, with an intention to consolidate the cement assets into one company that will have the scale and resources to compete globally.

Speaking at the inauguration of Tanzanian cement plant, Dangote explained the choice of Tanzania for investment, stating that the existing supply gap had been inadequate in meeting local demands, noting the need to boost export supply in the eastern Africa regional bloc.

“The construction sector is a major emergent component of the Tanzanian economy that has been receiving the attention of investors. This makes it an ideal market for cement production. The existing cement manufacturers have historically been unable to satisfy local demand, which has been filled by imports. As essential economy-driven infrastructure continues to be built to improve electricity supply and the transport network, additional demand for cement can be expected,” he said.

Dangote added that the investment will certainly contribute to Tanzania’s on-going story of infrastructure development, job creation, and broad economic development.

“Our strategy is to invest in countries that offer investors attractive returns on investment as well as provide them with an enabling environment to operate. It is our sincere belief that our $600million investment in Tanzania will further speed up infrastructural development and complement the government’s efforts in stimulating economic growth and creating jobs for the people. When in full production, this plant will make Tanzania self-sufficient in cement, with a lot of cement for export to neighbouring countries,” Dangote added.

Presidential Commendations

Nigeria’s President, Muhammadu Buhari and his Tanzanian counterpart, Dr. Jakaya Mrisho Kikwete commended Dangote for the investment, which is the largest private investment so far made in Tanzania.

According to Kikwete, there was no better way of rejuvenating and sustaining a nation’s economy if not through investment sustain which opens the door of for job creation and opportunity for people to express their creative abilities.

He described the 3 mtpa cement plant as the largest cement plant in the Eastern and Central Africa, noting that the investment is a huge one that would have a huge impact as well as bilateral relation between Tanzania and Nigeria.

Kikwete pointed that the timing of the citing of the cement plant was very auspicious, coming at a time when the demand for cement is on the upsurge and increasing both locally and regionally.

The President disclosed that cement price has been on the increase because of the shortages in supply as opposed to increasing demands, saying Dangote Cement is coming to fill the gap.

On his own part, Buhari, who was represented by the Kaduna State Governor, Mallam Nasir El-Rufai said Dangote is a key role player in the economic development of Africa and his investment model is in tandem with the unfolding economic policy of his government.

He said Dangote by his investment is teaching Africa nations the need to adopt an economic integration policy which will encourage Africans to invest in their continent rather than waiting endlessly for the elusive foreigners to come and help invest and develop Africa.

Buhari pointed out that Dangote has proved a point that though there could be challenges but there are huge returns for African investment in Africa.

“Others should emulate him and partner the government the onerous task of job creation. As our son, we are proud of Dangote. Nigeria is very proud of him,” Buhari said.

2015 Half Year results and Expansion Impact

DCP had grown its revenue for the half year ended June 30, 2015 by 16 per cent to N242 billion, from N208 billion in 2014. It ended the H1 with profit after tax of N121.8 billion, showing an increase of 28 per cent compared with N95 billon recorded in 2014.

Analysts at Dunn Loren Merrifield (DLM) had said the second quarter‘s revenue exceeded its eight quarters average of N102.15billion, reinforced by improvement in asset turnover.

According to DLM, “the growth in revenue indicates the company‘s drive to grow revenues generated outside of Nigeria and reduce its concentration risk. While it sees good potential in sub-Saharan Africa where infrastructure spending is high, we believe the Ethiopia, Cameroon and Zambia plants will improve sales and enhance competitive advantage.”

It is believed that with the addition of Tanzania and Senegal and South Africa being expected before the end of the year, DCP performance will definitely witness and major boost that will translate into higher returns in the years ahead.

Analysts had noted the company‘s strategy is to enter markets with higher-quality cement produced at lower- cost plants.

“This has enabled the company to build strong shares in key African markets, despite well-established competition. With this in mind, we believe the company will build on these successes in Africa and continue to expand its business across the continent most especially in Cameroon where the government recently banned importation of cement as part of measures to encourage domestic producers,” they said.

Positive Outlook

DLM had said with production capacity already at 40mmtpa following the inauguration of the Zambia and Ethiopia factories, additional 3mmtpa will come on-stream in the remaining half of 2015.

“Hence, the company‘s total capacity will move to 43mmtpa,as a result, we raised our expected sales volume for the year to 17,500 tonnes with an average price of N30,000/tonne, and other African operations accounting for 27.14 per cent of the total volume,” they said.

The analysts expect revenue growth of 35 per cent in FY‘15, with a Compound Annual Growth Rate (CAGR) of 13.24 per cent, that is from N528.71billion in 2015 to N869.55billion in 2019, driven largely by expected better regional sales matrix, economies of scale and energy mix strategy initiated by the company resulting to lower energy used/tonne and unit cost of power.

“The operating profitability or EBITDA of DCP remains strong as it currently trade above the minimum break-even EBIDTA/tone of $ 21 - which is the minimum a cement capacity must earn in order to provide for depreciation and interest costs,” they said.

Tanzania: Paradox in Cement Industry Seen

The country's cement industry is seen to be facing a paradox as supply reportedly exceeds demands while per capita consumption is among the lowest globally.

Industrial experts have it that the sector facing production over capacity and is heading to precarious situation when demand does not expand. However, the encouraging news is that the market is there as out of population of 47 million in Tanzania only 4.5 million are cement consumers, according to the Lafarge Tanzania Chief Executive Officer, Ms Catherine Langreney.

She said in Dar es Salaam yesterday that what needed is to create more demand as consumption 'per capita is still low' The CEO said the industry is in more danger today than previous as more players are coming in.

The country's consumption is merely at 80 kilograms per person which is very low compared to other economies in the world. In Kenya, for instance, is 120kg while in developing world goes up to 500kg per person.

Experts said the low per capita has positive correlation with GDP growth, since the higher GDP pushes up cement consumption as well. The over capacity has positive effect as cement prices in the market have started to go down in recent days from 17,000/- per 50kg bag of mid 2,000's to between 12,000/- and 13,000/-. The negative impact is risks for job loss and factory close down.

The country had three cement firms up to five years ago, with installed capacity of 4.65 million tonnes annually, but to date there are eight producers.

The eighth to come onboard, Nigeria's Dangote Cement, which went to production, last week push production capacity to over 6.0 million tonnes annually. The good news in cement industry recently are said to have impact on the two listed companies at Dar es Salaam Stock Exchange (DSE).

The two giant manufacturers--Tanzania Portland Cement Company (Twiga Cement) and Tanga Cement Company (Simba Cement)--shares plunged at the time when number of new firms set plants. On the DSE cement manufacturers share prices have depreciated by between 16 and 20 per cent since the beginning of this year.

Twiga cement went down by 16.25 per cent to 3,350/- a share while Simba Cement depreciated by 20 per cent to 3,400/-as of last Friday.

Brokers have it that the cement's firms share drop is seen as the results of shareholders unwilling to invest more on the sector fearing dividends drop as many players are coming up.

Tanzania Portland Cement Company (Twiga Cement) last year increased capacity by 700,000 metric tonnes- production line. While Lafarge Holcim, Mbeya cement, said yesterday will commission 700,000 metric tonnes vertical mill at the end of this month. Though the industry is blossoming, at the same time, cheap imports from the Middle East countries have continued to enter Tanzanian markets.

These cheap imports, said Ms Langreney, are creating unfair competition as they benefit from widespread acts of tax evasion through under declaration of prices and volumes delivered into local markets.

Recently Manufactures said through Tanzania Chapter of East African Cement Producers Association (EACPA) that they are now facing collapse due to the continued influx of cheap imported products in an already saturated market.

They urged that their situation was being made worse because, they were competing with cheap imports at a time when their margins are squeezed by overcapacity in the market.

The industry last year grew by 7.8 per cent, representing 8.6 per cent of GDP with effect across various construction aspects ranging from individual housing, transportation to mega structures.

TANZANIA: Dangote to Commission Tanzanian Cement Plant

Dangote Cement Plc has concluded plans to commission its new 3.0 million metric tonnes cement plant located in Mtwara District of Tanzania on October 10, 2015.

According to a statement, the company will also unveil its 25 hectares of Jetty land at Mgao village in Mtwara District the same day.

The company noted that the commissioning of the new cement plant is part of its Africa expansion strategy and will be the fourth in the series after Ethiopia, Zambia and Cameroun, adding that cement plants due for commissioning this year include that of Senegal and South Africa, while construction works are ongoing in several other African countries.

With the plant in operation, Tanzania is on its way to becoming one of African countries that are self-sufficient in cement production.

Vice President, Professor Yemi Osinbajo Osinbajo, while speaking at the commissioning of Zambian plant, lauded Aliko Dangote on his investment in several African countries, saying the Federal Government is proud of the company.

Osinbajo, who described Aliko Dangote as an exceptional African entrepreneur, commended his phenomenal vision, entrepreneurship and commitment to the development of Africa and Africans.

He said: "Dangote is a Nigerian from Kano State and he is a pan-Nigerian and pan-African who has done us all proud and his companies spread over 16 African countries, are a signal of an African multinational enterprise."

TANZANIA: Cement producers raise alarm on import ‘cheats’

Revenue authorities in the East African region have reported over 60bn/- loss through misinvoicing and other malpractices, a study by the East Africa Cement Producers Association (EACPA) has stated.

The Tanzania Portland Cement Company (TPCC) Managing Director and Area Manager East Africa, Mr Alfonso Rodriguez, said the matter has been reported in several occasions to relevant authorities.

"However, cement consumption per capita still remains low in the region comparing with West Africa and other emerging markets," he said in an interview with the Daily News in Dar es Salaam.

He said importation of substandard cement is mainly a threat to the end user and security of buildings and infrastructure in the region, especially Tanzania.

"Lack of proper quality certification at origin and permissively of Tanzania Bureau of Standards (TBS) officials has allowed uncertified cement to dump products in the domestic market. creating unfair competition situation that needs to be addressed," he said.

He also said East Africa region has become an overcapacity market, with over five million metric tonnes over capacity year to date. Yet the EAC governments lack of strategic vision to protect its key industrial sector and continue granting licences for new production capacity building bringing industry utilisation to lower than acceptable rates.

Mr Rodriguez called upon for an open and honest dialogue between the industry representing body, the East Africa Cement Producer Association and the competent authorities at country and regional level to sort out issues in cement business.

"Strategic priorities should be set to guarantee the viability of an industrial sector that is key for the further development of our countries," he said.

However, with expectation of some industry consolidation as new capacity comes on line and the market becoming more competitive, East Africa cement supply will be fully guaranteed by the local industry for the next 10 to 15 years.

He said that biggest markets in EAC are Tanzania and Kenya, with the major drivers being the fast growing population and urbanisation.

TANZANIA: Cement makers share prices fall

Share prices of cement firms listed on the Dar es Salaam Stock Exchange (DSE) slid during the last five months raising fears of marginal dividends among investors.

The situation was largely due to lowered investors’ appetite and demand for the two stocks at DSE. According to analysts, the whole manufacturing sector was last year marred by increased taxes, particularly, the 25 per cent increase of excise duty on July 2014.

Zan Securities Limited Chief Executive Officer Mr Raphael Masumbuko said in Dar es Salaam in an interview that hiked levies and duties on cement impacted heavily on the profitability of the companies.

“As cement production costs increases, the profitability is directly affected to hit heavily on the shareholders returns or dividends,” he said.

When shareholders returns dwindle, appetite for the current and potential investors to go for the stocks decline as well. For example, the percentage average change of Twiga Cement shares since January is 13.75 per cent down while Simba cement is 10.12 per cent.

Orbit Securities Limited General Manager Mr Juventus Simon shared the concern of the dwindling mood of the two stocks and underscored the need for the government to take swift measures to protect domestic industries.

Apart from increased costs, cement investors decried the importation of cheap cement from some Asian countries, thus creating unnecessary competitions in the market.

TANZANIA: Dangote cement arrival excites Tanzanian producers

Local cement manufacturers say they are not scared with the ongoing construction of a new factory in Mtwara Region, which is expected to start production in August, this year.

Nigeria’s Dangote is building a $500-million factory, an annual capacity of 3 million tonnes, in a move that will double Tanzania’s annual output of cement to 6 million tonnes.

“Obviously Dangote will bring in more competition in the market. We know and respect the firm as a responsible player,” Tanga Cement Plc Chairman of the Board of Directors, Mr Lawrence Masha, told a news conference in Dar es Salaam at the weekend.

Mr Masha who was speaking on the sidelines of Tanga Cement Annual General Meeting (AGM), said Tanzanian manufacturers should always expect changes in the market and face the challenges.

“We can only manage to produce 1.5 milllion tonnes of cement annually and expect others to make up for the rest of the demand which is ever growing,” he said.

He said what matters most was the firm to maintain the best quality of its product and satisfy the ever changing customers’ requirements. Tanga Cement Plc Managing Director, Mr Reihnhardt Swart, also said that the arrival of Dangote has not sent the firm’s management panicking.

He said the challenge was to maintain profitability through cost-effective operations and optimum use of resources. He pointed out that the cost of electricity was currently a major problem and the firm was drawing up strategies for optional sources.

Mr Swart said availability of natural gas to cement manufacturers in the country in the near future would a be a big boost. Tanzania recently made big natural gas discoveries totalling more than 53 trillion cubic feet and coal reserves of up to 5 billion tonnes, but lacks infrastructure to deliver the energy to major factories.

Other cement producers in the country include Tanzania Portland Cement, owned by a subsidiary of Germany’s Heidelberg Cement AG and Mbeya Cement, owned by France’s Lafarge SA.

Mr Masha told the AGM that despite many challenges Tanga Cement had a good year in 2014, although operating profit was 16 per cent below the level reached in 2013. “This performance can be attributed to increased direct sales and active initiatives to control and reduce costs,” he said.

He said the firm’s future outlook was bright, although the year 2015/2016 would remain challenging. “We expect to continue to deliver satisfactory results,” he noted.

He said there were a number of projects that have been approved by the government and private investors to provide exciting opportunities.

He listed them as development of Kawe City, Tanzanite Mall and Tanzania China Logistics Centre in Dar es Salaam, as well as the ongoing expansion of the Dar es Salaam Port.

TANZANIA: Dangote Cement to Start Production in August

Dangote Cement Plc has said it will begin production in Tanzania in August, as the sub-Saharan Africa’s leading cement producer eyes new markets in the continent.

A $500 million factory it is building in southern Tanzania, with an annual capacity of three million tonnes, will double the country’s annual output of cement to six million tonnes.

However, Dangote Cement faces challenges in accessing coal and natural gas as sources of cheap power to run the factory, its Chairman, Alhaji Aliko Dangote, Africa’s richest man, told President Jakaya Kikwete at a meeting in Dar es Salaam over the weekend.

Reuters quoted a statement released by the president’s office to have revealed that Tanzania, East Africa’s second-biggest economy, had made big natural gas discoveries and has coal reserves of up to five billion tonnes, but lacks infrastructure to deliver the energy to major factories.

Dangote’s factory is being built in the Mtwara region but there is no infrastructure to connect the plant to gas from nearby offshore natural gas fields.

Dangote applied last year for a licence to build a 75 megawatt coal-fired plant in Tanzania that would power the cement factory. Initially it will power the plant from electricity on the grid.

The Nigerian company plans to roll out plants across Africa to reach an annual capacity of 62 million tonnes by 2017, up from an estimated 42 million tonnes last year.

Its Tanzanian plant will supply the domestic market and export to landlocked countries in the region. It will be competing with other Tanzanian cement producers including Tanzania Portland Cement, owned by a subsidiary of Germany’s Heidelberg Cement AG ; Tanga Cement, majority owned by Afrisam Mauritius Investment Holdings Limited; and Mbeya Cement, owned by France’s Lafarge SA

TANZANIA:HeidelbergCement Shuts Tanzania Capacity on China Oversupply

HeidelbergCement AG will shut about a quarter of plant capacity at its Tanzanian unit due to oversupply and lower prices partly caused by cheaper imports from China and Pakistan.

Tanzania Portland Cement Co. Ltd. will cap output at 1.4 million metric tons of cement this year, compared with capacity of 1.9 million tons, Managing Director Alfonso Rodriguez said in an interview on April 27 at the company’s offices in Dar es Salaam, the East African nation’s commercial capital. TPCC, 69 percent owned by Germany’s HeidelbergCement, plans to scale back expansion and may cut jobs if the situation persists, he said.

“With current oversupply our business is not viable in the medium term,” Rodriguez said. “We may be forced to restructure our human resources.” Imports from China and Pakistan to Tanzania total about 400,000 tons, more than 10 percent of total demand, and are driving down prices as they aren’t subject to the same taxes and regulations as local producers, according to Rodriguez.

Cement companies are expanding in Africa as governments invest in infrastructure, boosting the need for building materials. Demand in Tanzania, East Africa’s biggest economy after Kenya, has grown by about 7 percent each year since 2011 to around 3.3 million tons, Rodriguez said. Major construction projects include a gas pipeline, power plants and the $565 million expansion of Dar es Salaam harbor, with work expected to start before the end of the year.

‘Unfair Competition’

The oversupply of about 2 million tons has been further stoked by companies including AfriSam Group (Pty) Ltd., South Africa’s second-biggest cement maker, which has about 1.2 million tons of capacity at its local unit, Tanga Cement. Lagos, Nigeria-based Dangote Cement Plc, Africa’s biggest producer, is building a $500 million, 3 million tons-per-year plant in Tanzania to start up by the end of the year.

“The price is under pressure due to unfair competition from imports,” Rodriguez said. “With the Dangote plant coming into operation, the pressure on our margins is unavoidable.”

Imports from China and Pakistan have reduced the retail price of cement to an average of 12,000 Tanzanian shillings ($6.05) per 50 kilogram (110 pounds) bag from 15,000 Tanzanian shillings in 2013, Hussein Kamote, director of policy and advocacy at the Confederation of Tanzanian Industries, said by phone on Wednesday.

Investor Concerns

“We have heard investors’ concerns and the government is addressing them tirelessly to ensure there is a friendly investors’ environment ensuring quick return on investments,” Dar es Salaam-based Daily News cited Industry and Trade Minister Abdallah Kigoda as saying on April 28. The ministry didn’t return calls on Wednesday.

Exporting cement from Tanzania isn’t a solution due to poor roads and railways linking to neighboring countries such as Rwanda and Burundi, Rodriguez said, as the transportation costs would be too high. HeidelbergCement’s other African markets include Ghana, Liberia, Burkina Faso and the Democratic Republic of Congo.

“Banning of imports would be the obvious reaction we expect from the government,” Tanga Cement spokesman Mtanga Noor said in an e-mailed response to questions. “A stricter policy is required where all imports be taxed to equivalent values as locally produced cement.”

TPCC profit gained 45 percent to 54.5 billion Tanzanian shillings last year, while Tanga’s profit fell 12 percent to 28.4 billion shillings. TPCC shares were unchanged at 3,800 shillings at the close in Dar es Salaam on Wednesday, valuing the company at 684 billion shillings.

“I have 500,000 tons idle capacity because I can’t sell on the market,” Rodriguez said. “We are not afraid of competition but if Dangote enters the market there will be a struggle.”

TANZANIA: Twiga Cement to have own gas plant

In an endeavour to reduce operational costs, the Tanzania Portland Cement Company Limited (TPCC) plans to have gas plant are expected to be realised this year.

The TPCC Managing Director, Mr Alphonso Rodriguez, said in Dar es Salaam during the 23rd Annual General Meeting (AGM) that arrangements were underway with a third party to build a gas plant at TPCC.

Once completed, he said the company will be assured of reliable supply of power to meet its operational demands.

Over the years, the power supply has been erratic, impacting heavily on the company’s capacity to meet its objectives. TPCC current demand is rated at 32MW and the gas plant would then come as an extra source of energy to compensate additional requirements and current fluctuations in power supply.

“The company’s investment in alternative sources of energy will ensure the reliability and quality of power supply,” he said adding that the initiative will contribute significantly to lowering the cost of doing business.

On Monday, the TPCC which trades on the Dar es Salaam Stock Exchange (DSE) as TWIGA had 20 shares in its counter transacted at weighted average price of 3,850/- per share in one deal.

During the period under review, TPCC saw its profitability jump to 54.5bn/- compared to 37.6bn/- of the previous year. Similarly, its sale volume rose by 15 per cent.

The positive performance was based on variable cost reduction and fixed cost contention. TWIGA Cement shareholders have a reason to smile following recommendation of directors of final dividend of 267/- per share (including 70/- per share paid as interim dividend) compared to 195/- paid in the year 2013.

TANZANIA: We Are Not Closed, Says Twiga Cement

Tanzania´s largest cement producer, Tanzania Portland Cement Company (TPCC) has refuted reports of closing down its operations due to environmental concerns as "false and overly exaggerated".

The TPCC Managing Director, Mr Alfonso Rodriguez, told the 'Daily News' on Wednesday that, "We are not closed, the operations are going on as usual at TPCC," Last week, TPCC which trades as Twiga on the Dar es Salaam Stock Exchange (DSE) was reportedly ordered to close down operations by the National Environment Management Council (NEMC).

Several media outlets reported that NEMC faulted one of the plant's chimney for discharging a huge amount of dust said to be bad for people surrounding it.

Mr Rodriguez declined to give more details but noted briefly that, "There are a lot of misinformation and exaggeration on the issue."

TPCC produces almost 50 per cent of the cement output in the country. Closure of the plant was likely to create speculations that could drive up cement prices.

The equity market reports show that TWIGA shares were trading at a sober mood and on Monday this week lost 0.51 per cent after closing at 3,900/- from 3,920/- on Friday.

Official data from the cement industry shows that TPCC produces 1.4 million tonnes of cement out of the country's annual output of 3 million tonnes.

The rest output is shared largely between Mbeya Cement Company and Tanga Cement Company. According to the half year 2014 financial report, TPCC recorded revenues of 115bn/-, which is an increase of 13 per cent compared to the corresponding period in the year 2013.

The increase in revenue was mainly a result of increased sales volumes and overall improved performance. Similarly, the operating profit for the period increased by 38 per cent to 37.08bn/- compared to the same period in the preceding period largely due to reduced production costs.

Net profit for the period increased by 41 per cent to 27.14bn/- compared to 19.25bn/- of the corresponding period 2013.

TANZANIA: Tanzania to increase cement production

Tanzania expects to double its cement production in the next few years as new factories come on-stream to satisfy growing demand from the construction sector, a senior government official said on Tuesday.

Cement consumption is viewed as a barometer for construction activity, which is one of the main drivers of economic growth in the country.

Annual cement production in east Africa's second-largest economy will rise to 6 million tonnes in a few years' time as seven new factories start operations, deputy trade minister Janet Mbene told parliament, without being more specific about the timeframe.

Tanzania's cement output rose 18.9 percent last year to slightly above 3 million tonnes on the back of higher demand.

Mbene said the rise in output would mean Tanzania would produce a surplus to be exported. 

Cement makers operating in the country include Tanzania Portland Cement, which is 69.3 percent owned by a subsidiary of Germany's Heidelberg Cement AG; Tanga Cement, 62.5 percent owned by Afrisam Mauritius Investment Holdings Limited; and Mbeya Cement, 62.76 percent owned by France's Lafarge SA.

The new cement factories under construction include a 3-million tonne capacity plant being built by Nigeria's Dangote Cement, Mbene said.

TANZANIA: cement company signs MOU with Tanzania Prision

Tanzania Portland Cement Company Limited (Twiga Cement) has signed a Memorandum of Understanding (MoU) with Tanzania Prison for the production of limestone at Boko Prison in the outskirt of the Dar es Salaam city.

Speaking to the East African Business Week during the official handing over ceremony $100,000 (Tsh 100 million) as well as 1,200 bags of cement to the Tanzania Prison, the Permanent Secretary in the Ministry of Home Affairs, Mbaraka Abdulwakil said the production of limestone from Boko prison mines will commence during the first quarter of next year following the government approval of the deal.

He said the funds and 1,200 bags of cement would be used for the construction of houses to prison warden’s officials and staff at the Wazo Hill Prison. 

Mr Abdulwakil said that recently Tanzania Prison and Twiga Cement signed a MoU to improve and revamp the Tanzania Prison infrastructures system including staff houses.

“The government is welcome the improvement made by the management of Tanzania Prison in collaboration with the private sector (investor) through Public Private Partnership (PPP),” he said.

He said that the Tanzania Prison Management after adapting the government motto of “Big Result now” has started implementing the improvement of its infrastructure system to fast track the development of the sector in the country.

The minister has also called on the senior prison officials to adhere public ethics in overseeing the community projects that are supported by the private sector especially investors in order to create confidence on them.

He underscored that the project undertaken at the Wazo hill Prison that the management and Twiga Cement should take into account the issues of environment to ensure that the construction doesn’t destroy the environment and affect the people’s life.

Twiga Cement, Managing Director, Alfonso Rodriguez said the firm will continue supporting the government through Corporate Social Responsibility (CSR) in various sector such as power, water and construction of houses.

Tanzania: Dangote Cement wants its own power plant

Dangote Cement has applied for a licence to build a 75 megawatt coal-fired plant in Tanzania that would power a $500 million cement factory now under construction, Tanzania's energy watchdog said.

Sub-Saharan Africa's leading cement producer plans to roll out plants across Africa to reach an annual capacity of 62 million tonnes by 2017, up from a projected 42 million tonnes this year.

Businesses often complain that poor or erratic supplies deter investors and push up costs.But any corporate expansion plan in Africa must contend with power shortages, which are common across the continent.

"Dangote Industries ... applied for a 75 MW electricity generation licence to build, own and operate a coal-based captive power plant adjacent to its cement manufacturing plant," the state-run Energy and Water Utilities Regulatory Authority (EWURA) said in a statement on Tuesday.

All the electricity would be "used to run the plant and machinery for the manufacture of cement, utilities and housing colony", EWURA said.

"Any interruption in power supply or unstable voltage/frequency causes extensive damage to the refractory and also to the rotary kiln parts.

"Refractory failures cause production shutdowns varying from 15 to 30 days and unscheduled use of costly imported refractory bricks," the regulator added.

Dangote Cement, owned by Africa's richest man Aliko Dangote, already operates in 13 African countries and posted $2.45 billion in revenue last year.

The factory it is constructing in southern Tanzania is scheduled to be commissioned in the second half of next year.

With an annual capacity of 3 million tonnes, it will supply Tanzania's domestic market and export to landlocked nations in the region.

Cement makers in east Africa's second-biggest economy include Tanzania Portland Cement, which 69.3 percent owned by a subsidiary of Germany's Heidelberg Cement AG; Tanga Cement, which is 62.5 percent owned by Afrisam Mauritius Investment Holdings Limited; and Mbeya Cement, 62.76 percent owned by France's Lafarge SA.

TANZANIA: Dangote’s Surging Cement Activities Propel Tanzanian Coal Investment

Investment in coal production is gaining momentum in Dangote Group’s business drive across Africa as the company’s President; Aliko Dangote promised to invest an undisclosed sum in Mbinga mine, a major coal mine in the Southwest of Tanzania.

The new investment was made known by Aliko Dangote at a meeting with the Vice president of Tanzania, Dr. Mohammed Gharib Bilal during the Africa Global Business Forum in Dubai.

According to the reclusive billionaire, the coal produced from the Mbinga mine will be used to energize his Mtwara cement plant which is currently under construction. It will also be used to aid transportation of cement across Tanzania’s borders.

The Mtwara cement plant, which is expected to be a primary driver in Tanzania’s economic growth, will produce three million tonnes of cement per year while coal investment in the transportation sector will create about 3,000 employment opportunities; Tanzania’s Guardian newspaper reported.

This is not Dangote’s first investment in coal production as an alternative power source for his cement factories; In August, the business mogul announced a $250 million investment to build coal-fired power plants in its Obajana, Ibeshe and Gboko plants in Nigeria..

He is also planning to invest another $12 billion in the Nigerian economy, for which more power plants and a $9 billion refinery should spring up.

In his Eid-el-Kabir message over the weekend, the business magnate said he will invest $2.3 billion in sugar and rice production in Adamawa State to create about 180,000 jobs and combat terrorism in the North-East of the country. Another $4 billion will be invested in other parts of Africa in the next five years, he said.

TANZANIA: Govt conducts feasibility study on 35 pct cement tax

Ministry of Industry and Trade experts are now conducting feasibility study to oversee whether the reintroduction of 35 per cent tax on imported cement will have less brunt to both manufacturers and buyers. 

In a phone interview with The Guardian at the weekend, Permanent Secretary in the ministry, Uledi Mussa said the study has come after cement manufacturers urged the government to reverse the tax so as to create fair competition.

He said in order to ensure fair competition; the findings obtained will be presented to the government for further implementation.

According to him, the government will work on the proposal to oversee if the proposals will bring about fair competition and have delicate balance to both manufacturers and buyers. 

He, however, admitted that currently the price of cement in the country is still high due to production cost especially the cost for electricity, adding that it is not a reliable source of energy.

“The government is finding ways to ensure that electricity is available at affordable prices. It’s our hope that the installation of gas pipe to Kinyerezi power plant by December this year will help to reduce production cost of cement,” he said. 

Besides, he said the operation of new cement factory “Dangote” will to great extent increase cement in the market hence reduce its prices.

He said the reason why the saying ‘sensitive products” was removed in 2008 was because of cement shortages occasioned by the construction of stadiums for the 2010 World Cup in South Africa.

Mussa further said as a result, import duty was reduced to 25 per cent from 40 per cent and has remained so todate.

Local producers claimed that the cement import tariff reduction has made cheap cement from China, India and Pakistan flood the market, with market insiders saying cement from those countries sold at 50 per cent to 60 per cent below the domestic market price.

Seconding the argument, the Standing Permanent Committee Chairman of Industry and Trade, Luaga Mpina said if the 35 percent levy is re-introduced, it will help check imported cement and boost local production and at the same time level the playing field for foreign and domestic companies.

Mpina said the government should reverse the tax in order to protect the local industry regardless of other East African countries’ decisions.

Recently, the East African ministers jointly decided to remove cement from the list of “sensitive products”, meaning partner states would continue paying an import duty of 25per cent on Portland cement and promised low consumer prices.

The East African Community (EAC) had a sensitive list of products covered by the EAC Customs Union Protocol, which exposed cement to a 55per cent tariff to be reduced by five percent a year from 2005.

While the 25per cent tariff may seem best to the bloc currently, the ministers are expected to address the tariff issue once its overall effect on the market is observed.

“We had hoped the import duty would be increased to at least 35per cent so that we’re cushioned from the imports,” said Narendra Raval, chairman of Devki Group.

Raval, whose company produces the National Cement brand, noted that local cement producers expected to be promoted before cheap imports were allowed into the market.

TANZANIA: Cement firm signs TANESCO

Tanga Cement Company Limited (TCCL) has signed an agreement with Tanzania Electric Supply Company (TANESCO) to ensure reliable power supplies to sustain efficient production levels.

TCCL’s Managing Director, Reinhardt Swart told East African Business Week in Dar es Salaam last week the agreement would assure Tanga Cement receives adequate and reliable supply of electricity and ancillary services on the 132/33Kv line.

“This agreement comes at a time when the cement manufacturer is expanding the capacity of its operation, whereby a new kiln line is being constructed at its plant in Tanga,” Swart said.

TANESCO deputy Managing Director (Investment) Decklan Mhaiki said the deal would improve Tanga Cement production capacity.

“Tanga Cement is one of our giant customers. Taking into consideration their status, we have agreed to supply power to their sub-station in a move that will foster their production capacity,” he said.

According Swart, the company’s expansion is expected to double the company’s electricity demand to 40MVA, which TANESCO has agreed to supply.

Swart said they are currently eyeing the East African market by exporting ists flag brand, Simba Cement to Uganda. TCCL is also exporting its product to the Democratic Republic Congo (DRC), Kenya and Rwanda but they are looking forward to selling in Kampala.

“We are still studying the market competition in Uganda although it’s far but we will export our product to Kampala,” Swart said.

Swart said the agreement also provides guidelines on communicating power outages between the two parties so as to minimize production disruptions at the cement factory.

TANZANIA: Set to Be One of Africa's Top Cement Maker

CEMENT production is becoming an important manufacturing activity that would contribute immensely to Tanzania's economic growth, in terms of exports and job creation.

The cement industry has of late seen more key players coming in, the move that would lead to increased production to make the country the largest cement producer in Africa. Locally, the situation will stir up competitions that would force prices to decline, to benefit the local consumption thus becoming an important incentive in encouraging construction activities.

Adjourning the 14th session of the National Assembly in Dodoma at the weekend, the Prime Minister, Mr Mizengo Pinda, said the cement industry has positive prospects to become the largest contributor of revenue to the government as well as job creation.

He said the current production capacity in the country is 3.8 million tonnes per annum, but it is expected to more than double to 8.3 million tonnes per annum in the near future. Domestic consumption is also projected to increase to 3.9 million tonnes per annum from 2.25 mtpa.

Premier Pinda said there are ongoing five cement mills construction projects in Arusha, Tanga, Lindi and Mtwara regions to make a total of nine cement projects which will make Tanzania the largest cement producer on the continent.

"To ensure that Tanzania exploits fully the huge potential in the cement industry, Premier Pinda said the government will act strongly in curbing importation of 'cheap' cement which have been contributing to killing the local industries and deny the country revenue," he said.

Also, it is projected that construction of residential and commercial housing will continue to dominate local cement demand at around 85 per cent in the medium term. Construction and housing sectors will continue per same projections to be the main driver of cement consumption in the country.

Available reports from the cement producers show that by next year, Tanzania is projected to become a net exporter of cement - fully supported by projected strong demand from its (import dependent) neighbour countries of Burundi, Rwanda, and East DRC.

Even though the projections show a diminishing role of the mining sector (mine construction) in increasing demand for cement in the country, it is still foreseen an uptick of activities in other sectors (infrastructure and residential housing in particular).

Also the more key players enter into the cement industry, it is projected a decline in production costs (supported by falling energy costs and improving energy supply), and a decline in prices due to the expected entrance of new players (Lake Cement and Arthi River).

Factoring projected falling prices, it is also expected revenue growth to be largely driven by volume, riding on the expected increase in demand (internal and external) especially from neighbouring countries of Rwanda, DRC, and Burundi.

For example, the new Dangote Cement Factory now under construction in Mtwara, will be the biggest cement project in the country, East and Central Africa, is expected to ease pressure on prices of the product once the investment project starts production next year.

Mr Aliko Dangote, the Group President and Chief Executive Officer said during his visits to the country last week that when the plant starts work next year, the company would look at how to reduce pressure on the price of cement.

One of the measures he noted is to find ways of countering costs that arise as a result of distribution difficulties as one way of reducing pressure on cement prices.

The firm would first procure 250 trucks to handle distribution of the product across Tanzania. Similarly, to handle challenge of getting skilled labour in Tanzania for their operations, they would first take Tanzanian engineers to the Dangote Academy near Abuja for training.

The country is set to more than double its cement production capacity next year when the factory is completed. Currently, the price of cement per tonne remains relatively high averaging between 90 and 105 US dollars due to high energy costs and dependence on imported clinker.

The capacity of the factory is expected to be three million tonnes per annum, out of which he expects to get a good chunk of the market share. Mr Dangote hopes that the new cement plant would first satisfy the local market. Tanzania Portland Cement is currently the country's biggest producer with a production capacity of 1.4 million tonnes per annum.

Comparatively, Tanga Cement has a capacity of 1.25 million tonnes per annum while Athi River Mining Tanzania produces 750,000 tonnes per annum. Mbeya Cement Plant has an installed capacity of 350,000 tonnes per annum. Alhaj Dangote is a Nigerian business magnate who is ranked by the Forbes magazine as 43rd richest person in the world and first in Africa.

According to the company, they have set a goal of becoming one of the world's leading cement companies by 2016. The company's investment profile in the continent stretches from Nigeria, Tanzania, Cameroon, Senegal and Gambia to South Africa, Zambia and Ethiopia, to name just a few.

This is an opportunity to exploit the comparative advantage in cement production that will bolster construction sector and its contributions to economic growth and job creation.

TANZANIA: ´CHEAP´ CEMENT IMPORTS HURT DOMESTIC PRODUCERS

LOW priced imported cement has continued to bedevil locally produced products, despite the rise in demand.

Tanga Cement Company Limited (TCCL), has, however, reported that it has managed to survive despite the

odds due to good quality of its products and customer care.

According to the audited results for the year ended December, last year, demand for cement products for both

the local and export market remained high.

But the unfolding scenario was captured by cement importers. “Consequently, sales volumes as well as the

selling prices achieved by local firms remained lower than expected compared to the preceding period of the

year ended December 2012,” Tanga Cement which trades at the Dar es Salaam Stock Exchange (DSE) as

Simba said in the statement.

TCCL net profit for the year dropped to 32.45bn/- compared to 34.49bn/- registered in the period ending 2012.

Similarly, total revenues declined to 182.78bn/- in the period under review compared to 195.6bn/- of the

preceding year.

However, a major milestone achieved during the year was acquisition of an additional 40 per cent shareholding in the CDEAL, giving the company full ownership of the sales and distribution arm of the business ensuring improved integration and strategic alignment with TCCL.

Improving operational efficiencies and containing production costs were a major focus in the year 2013, with

significant achievement noted during the second half of the year.

For example, the cost of sales as one of the cost items, the company managed to pull down to 120bn/-

compared to about 129.8bn/- of the year 2012.

Also, during the period under review, the company secured supply of coal from local sources and entered into

negotiation for long term purchase agreement for clinker, thus adding to cost reduction efforts.

Furthermore, with the completion of the new kiln, the company is expected to enhance its competitiveness

advantage by increasing clinker production capacity to 750,000 tonnes per annum, which is more than doubling

the present capacity