africa Cement Economy Industry manufacturing Tanzania

Chinese firm whets appetite for Tanzanian cement sector

Approximate reading time: 3 minutes

The Tanzania Investment Centre (TIC) has granted an operation licence to Chinese investors that had expressed interest in establishing a cement manufacturing plant in the country.

The Chinese company, Sinoma and Hengya (T) Limited, pledged to commence the construction of a Tshs.2.3 trillion ($1 billion) cement factory in the Tanga region`s Mkinga District, very soon.

Sinoma and Hengya (T) Limited is a union of Hengya Cement which is a subsidiary of China`s Hengyuan International Engineering Group and Sinoma Cement which is a subsidiary of Sinoma International Engineering Company. Hengya Cement was appointed as the associate developer for the project while Sinoma Cement will undertake the construction works on the project which includes construction of a grinding unit, a clinker unit, warehouses, processing units as well as the installation of machinery and equipment.

The Chinese firm is set to construct a cement factory with an initial cement production capacity of 2.5 million tonnes annually with an eventual target of 7 million tonnes following further investment. Alongside cement factory, the company plans to establish a power plant that can generate 1,200 Megawatts. The power plant will help to reduce on the country`s electricity deficiency which is characterized by multiple power shortages and crippling load shedding and will also help to steer the country towards the envisioned industrialized economy by 2025.

At least 70 per cent of the cement production will be exported through the Indian Ocean to the neighboring Somalia, Kenya and Mozambique and 30 per cent will be for the domestic market. The company has also proposed the construction of a dock at the Tanga port that will facilitate the exportation of cement. The proposed investment will offer direct and indirect employment opportunities to over 7000 individuals and will generate annual revenues amounting to Tshs.400 billion ($173 million). TIC gives investors a licence that gives them three years during which implementation must start and failure to do results into licence revocation.

Currently, Tanzania`s cement producers have installed a capacity of about 11 million tonnes per annum against a domestic market demand of about 5 million tonnes annually with average cement consumption of 88 kilograms per individual. The overcapacity has in the previous years resulted in price wars among cement makers resulting in the reduction of profits and hurting their revenues.

Tanzania`s cement producers include Dangote Industries Tanzania, Lake Cement Limited, Tanga Cement PLC, Camel Cement Company, Kilimanjaro Cement Limited, Lee Building Materials Limited, ARM Cement Tanzania Limited, Mbeya Cement Company Limited, Tanzania Portland Cement Limited, Rhino Cement, Mtwara Cement, Kisarawe Cement Company Limited. As of 2016, Tanzania Cement Manufacturers were producing an estimated 2.8 million tonnes annually, with Tanzania Portland Cement Limited being the production leader, accounting for 36 per cent of the market share followed by Tanga Cement Plc and Dangote Industries Tanzania. By December of the same year, five new manufacturers had set up industries in the country raising annual installed capacity to 10.8 million metric tonnes with total production in 2016 amount to 7.1 million tonnes. Annual consumption in 2016 was 4.1 million tonnes with the balance exported to the neighbors including Burundi and the Democratic Republic of Congo (DRC).

Africa`s leading cement producer, Dangote Cement stated that in 2016, the capita cement consumption was around 50 kilograms per annum which was below the global average and even low for Africa. The company further stated that the increased performance of the economy had fueled strength in cement demand and the prospects remained favorable, given the linear relationship between economic growth and the consumption of cement in the country citing ongoing implementation of flagship public infrastructure projects and the growth of the housing sector.

In August last year, three major cement industries slowed down their production which led to an acute shortage of the commodity  throughout the country, pushing up the prices despite the fact that Tanzania has overcapacity in cement production. Retail prices in Dar es Salaam and elsewhere increased by more than 20 per cent from Tshs.13000 ($5.6) per 50-kilogram bag up to between Tshs.16000 ($6.9) and Tshs.20000 ($8.6).

Source: The Exchange

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