High costs taking toll on Ugandan and

Rwandan cement firms

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Cement is packed at the newly completed Cimerwa plant in Rusizi District, Western Province, on July 9, 2015. PHOTO | CYRIL
NDEGEYA
By KABONA ESIARA
Posted Saturday, April 9 2016 at 11:26

IN SUMMARY

Despite global cement prices falling by 10 per cent, consumers in Rwanda and other landlocked countries in the region
will continue paying more as manufacturers fight for survival.

The global cement market has seen a surge in production as demand remains flat.

On average over the past decade, East African cement consumption has been growing at a rate of 14 per cent and is
expected to continue growing in the near future at around 8 per cent per annum with total capacity expected to reach 14.4
million tonnes by 2017.

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Cement firms scramble for project funds in East Africa

Despite global cement prices falling by 10 per cent, consumers in Rwanda and other landlocked countries
in the region will continue paying more as manufacturers fight for survival.

The small cement market coupled with high operational costs have forced manufacturers to charge high
prices to stay afloat.
The cement makers with plants in East Africas landlocked countries Uganda and Rwanda are less
competitive. It costs Rwanda on average $4,990 to import a 20ft container of raw materials when
competitors in Tanzania and Kenya pay less.
This explains why cement transported from Tanzania to Rwanda still remains competitive in Kigali. A
comparison of prices by The EastAfrican shows that Tanzania-made Simba cement costs $110 per tonne,
Twiga $100 per tonne, Kilimanjaro $100 per tonne in Kigali.
Hima Cement from Uganda costs $177 while Cimerwa Cement, which is manufactured in Rwanda, costs
$178 per tonne.
Prices are a factor of logistics and operational costs. On the African continent the biggest challenge is
distance of the market from where cement production takes place, said Njombo Lekula, director of
international operations at Pretoria Portland Cement. Another factor contributing to the high prices,
according to industrial players is distance of cement factories from the market.
For instance, in Uganda, Tororo Cement Industries sources its limestone from Karamoja to feed its
factory in Tororo and transports the finished product to biggest market in Kampala.
READ: Reduced duty on imported cement sparks furore among EA producers
Likewise, Rwandan cement manufacturer Cimerwa is located 450km away from Kigali the major market
for the cement the plant makes.
The players also cite the energy costs that have to be factored in before reaching the final cost of cement.
For each bag of cement manufactured is energy costs account for 40 per cent of total costs, said Dr Ivan
Twagirashema, a board member of Cimerwa, adding that the region must find ways of cutting costs of
production.
The experts noted that cement manufacturing is a capital-intensive business whose margins depend on
turnovers.
At policy level, the region should protect the local market from cheap cement imports, said Patrick
Mugenyi, general manager of Hima Cement.

The global cement market has seen a surge in production as demand remains flat.
Generally, there has been a surge in new capacity coming online at the same time that demand is either
slowing, or in some cases, declining. So the deterioration in the supply-demand balance has created
pricing pressure in many markets, said chief executive of IA Cement Ltd, Imran Akran

By KABONA ESIARA
Posted Saturday, April 9 2016 at 11:26

IN SUMMARY

Despite global cement prices falling by 10 per cent, consumers in Rwanda and other landlocked countries in the region will continue
paying more as manufacturers fight for survival.

The global cement market has seen a surge in production as demand remains flat.

On average over the past decade, East African cement consumption has been growing at a rate of 14 per cent and is expected to
continue growing in the near future at around 8 per cent per annum with total capacity expected to reach 14.4 million tonnes by 2017.

RELATED STORIES

Cement firms scramble for project funds in East Africa

But Rwandas Minister for Infrastructure James Musoni said the region offers huge potential; for a robust
cement industry given an increase in commercial projects, housing developments and ongoing
government infrastructure projects.
In sub-Saharan Africa, Nigeria remains the largest consumer, with an estimated 18.3 million tonnes
consumed in 2013, followed by South Africa that consumed 12.2 million tonnes. Together these two
countries represent half of sub Saharan Africas cement consumption.
The statistics were released during the just concluded 8th Africa Cement Summit in Kigali.
On average over the past decade, East African cement consumption has been growing at a rate of 14 per
cent and is expected to continue growing in the near future at around 8 per cent per annum with total
capacity expected to reach 14.4 million tonnes by 2017.
READ: Dilemma for EA cement firms: production set to pass consumption
Imports from India, Pakistan and China have been blamed for flooding the market in East Africa.

The growing imports from Asian countries continue to pose the biggest challenge for the industry,
particularly in Tanzania where producers estimate that 300,000 tonnes of cheap cement could be finding
its way into the local market every year.
The cement market in Kenya has strong links with Uganda and Tanzania, with several producers having
production units in more than two countries so the actual geographic market of cement may be even wider
than Kenya itself.