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Cement industry in huge leaps as public projects push up demand

Huge government projects and construction at- tract top dollar in the cement industry as old players expand while new entrants take a bet, writes ALON MWESIGWA.

At Namawojolo, Mukono district, off Jinja-Kampala highway, rising structures dot the skyline. A massive chunk of land – 131 acres – is under development, with graders chipping away the ground while workers place final touches on construction.

The sound of the grinding mills can be heard from a distance. This is home to Kampala Cement Limited, the latest addition to Uganda’s cement industry, where the company says it has the capacity to produce more than one million tonnes annually.

City lawyer MacDosman Kabega, one of the company owners, told The Observer that they had so far invested 110m euros (Shs 412bn ) in the project, which opened officially in September last year.

Less than two years old in operation, Kampala Cement scooped a major deal to supply cement to the 800MW Karuma plant, ahead of older firms such as Hima Cement, which is yet to officially supply cement to the same power plant. In September, it supplied 1,200 tonnes of cement to Karuma.

A section of Kampala Cement factory

To prop up local content requirements, the Karuma contractors needed a producer of quality cement. They had said that most local producers did not meet the standards. They turned to Kenya, where they got supplies from Savanna Cement Limited.

Kampala Cement Managing Director Bob Baryaw said the firm has already had officials from the standard gauge railway test its cement to see whether it meets the quality. Baryaw said they employ 450 people, 29 of these being expatriates.

In a brief profile memo, the company says it started operations with a capacity to produce 20,000 tonnes a year. However, company officials said the plant was upgraded to produce one million tonnes per year. Kampala Cement’s factory represents one of the big movers and shakers in the cement industry.

As government embarks on major infrastructure projects, cement producers are taking positions to cash in. The market is witnessing strong appetite from new cement players while the older firms expand their production capacities.

NEW PLAYERS

While the old players are consolidating their positions in the sector, the country is getting appetite for new entrants. Last year, Kenya’s National Cement announced that it was to spend at least $200m to build a new plant in Mbale. It said construction would start by the end of 2016, although it has not started.

Also, in 2012 Afghan investors said they had plans to set up a multi-million cement factory in Moroto district. The firm, Moroto Cement (U) Ltd, is expect- ed to produce one million tonnes annually.

In October, government announced it would set up a cement factory in Karamoja through a public- private partnership with Moroto Ateker Cement Co Limited.
There have been reports that Africa’s richest man Aliko Dangote was also eying the Ugandan market. Some of these pronouncements are yet to materialise.

MOVEMENTS

In September, Lafarge’s Hima Cement announced it was to spend $40m on a new plant in Tororo Nyakesi, Rubongi sub-county, a small distance from its main rival - Tororo Cement Limited.

Rubongi sub-county is one of the areas where Guangzhou Dongsong Energy Group Ltd is expected to mine phosphates and build a $620m fertilizer plant. Hima Cement signed an MOU with Guangzhou to supply it with cement.

Daniel Pettersson, the chief executive officer, said then: “We are embarking on several capacity building projects starting with the construction of a grinding station at the end of 2016; we are in final stages of exploration of limestone positions in northeastern Uganda to support clinker position.”

In 2010, Hima Cement invested $120 million at its Kasese plant, which saw production capacity move to 900,000 metric tonnes per annum. On completion, the expansion to Tororo expansion will further increase Hima Cement’s capacity to 1.9 million tonnes per year.

Hima Cement is also preparing to launch Ready Mix Concrete operations in Kigali, Rwanda, within the first quarter of 2017, which will be followed by similar operations in Uganda.

“We are very positive about the long-term prospects of the cement industry in Uganda,” Patterson told reporters in September.

A Kampala Cement supply vehicle

Meanwhile, Tororo Cement, the country’s biggest cement manufacturer, last year announced it would spend $25m on plant expansion. It said its capacity would upgrade from 1.8 million tonnes to three million tonnes, maintaining its position as the biggest cement manufacturer in the country.

Brij Mohan Gragrani, Tororo Cement’s CEO, said last year: “The expansion is proposed in view of market demand in Uganda and the neighbouring countries.”

He said they would construct more cement grinding mills, cement storage silos, rotary packers, and clinker feeding system and clinker sheds. Tororo Cement has also gone to Moroto, where they are expected to put up a new plant. The firm is already supplying cement to Isimba dam.

Uganda will become an oil-producing country by 2020/2021, according to government’s target. Combined, the biggest projects in the oil and gas sector – the refinery, pipeline and storage facilities, etc - will cost more than $10bn.

Uganda is finishing compensation for the Standard Gauge Railway (SGR) and construction could begin later in 2017. The Jinja-bridge construction has also started.

Most major roads are undergoing construction, including mega projects such as the Kampala-Entebbe expressway. Parliament has given government a go-ahead to borrow $136m for the Busega-Mpigi expressway, expected to start in 2018. Government has also proposed to build the Kampala-Jinja express- way.

CONSTRUCTION

Aside from public projects, the real estate sector has been growing, although demand has waned in recent months. For instance, although rental demand has flattened, according to Knight Frank report for 2016, the real estate sector “registered an increase in the number of properties which came onto our books for sale first half of 2016.

These properties are mainly in the greater Kampala Metropolitan areas of Kira, Naalya and Najjeera, which are becoming increasingly popular for middle-income home owners.”

Many people are taking salary loans to construct houses. Last financial year, the construction sector did not perform well partly as a result of high interest rates. The sector grew by only 0.5 per cent, according to Bank of Uganda figures.

Developers, however, are optimistic about the future. The central bank has been easing its key rate, which is expected to give bankers room to cut interest rates. This will boost borrowers’ confidence and spur activity in sectors such as construction.

The regional market is also open. In 2015, Uganda exported cement worth $80.13m, a drop from $89m in 2014.

RAW MATERIALS

Production of limestone, a key raw material in cement production, continues to grow. According to Uganda Bureau of Statistic’s abrastract2015, the production of limestone increased by 18.2 per cent from 922,000 tonnes in 2013 to 1,090,000 tonnes in 2014 and the quantity of Pozzolana increased by 19.1 percent from 623,000 tonnes in 2013 to 742,000 tonnes in 2014.

The remaining viable limestone deposits are in the Karamoja sub-region – where many cement companies have rushed to. The exploration process is usually marred by land disputes.

Kampala Cement is importing clinker from China, company officials said. In Uganda, they get pozzolana, another main component in cement production, from Kapchorwa in northern Uganda.

amwesigwa@observer.ug

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