Dangote shakes Ghacem; stabilises cement price
The management of Dangote Cement Plc says the company is well positioned to become the leader of the cement industry in Ghana and Africa within the shortest possible time.
The Group Head, Corporate Communications of Dangote Industrial Limited, Anthony Chiejina, told Business Day in Lagos that Dangote Cement’s competitors in Ghana such as Ghacem must brace up for a fair competition and desist from its current defensive tactics.
“Ghacem and other multinational cement companies operating in Africa are making huge profits because of the low tax. They are fighting Dangote Cement because they don’t want any other company to share the market with them.”
He continued: “Ghacem is just using defensive tactics but we are ready to meet any competing brands in the Ghanaian market. We are not afraid of them.”
The Plant Director at Dangote Cement Plc at Ibese, Nigeria, Armando Martinez Gallegos, advised competing brands in the Ghanaian market to focus on improving on its operations.
“We want to lead the market and not to kill it. The competition is to help the competing brands to improve upon what they are currently doing,” he stated.
Ghacem, has since its inception in 1967, produced more than 30 million tons of cement.
The multinational cement company wants to continue to be Ghana’s biggest cement manufacturer and supply the market with good quality cement at a reasonable price.
In 1993, the Ghana Government sold 35 per cent of its shares to Scancem (formerly Norcem).
Scancem as a result had 59.5 per cent, leaving it with 40 per cent to Ghana Government and 0.5 per cent going to a local investor.
In 1997, the Ghana Government sold five per cent of its 40 per cent shareholding to the workers of the company.
The remaining 35 per cent shares of Ghana Government was sold to Scancem in 1999 and at present Scancem has 93.1 per cent shares in the company, Ghana Government has five per cent shares while 1.9 per cent is owned by Dr. J. A. Addison, a local investor.
In 1999, Heidelberg Cement took over Scancem, thus making it a subsidiary. Scancem International DA, a Norwegian company and now part of Heidelberg Cement, is a leading company in the African cement market.
Dangote Cement Plc, on the other hand, is Africa’s leading cement producer with existing and planned operations in 16 African countries and Nepal with revenues in excess of $2 billion.
Top on the list of countries in the West African region where the company is operating is Ghana, which they have allocated 1,000 trucks that is delivering cement to its customers.
Others are Cameroon, Senegal, South Africa, Tanzania, Zambia and Ethiopia.
Currently, the company’s total installed capacity for Africa is 44 million tons daily.
The company remains committed to its ambitious plans, as it’s taking a more measured approach to roll-out capacity across Africa.
Analysts believe that Dangote Cement’s achievements in the African and global cement market against all the odds underscore the essence of all Africans and deserve to be heralded.
Developers and prospective developers, who felt Ghacem had enjoyed monopoly in Ghana over the years were jubilant when Dangote Cement entered the Ghanaian market with its quality but affordable product.
Reduction in Cement Price
Recently, the price of cement had been stable on the Ghanaian market following the entry into the market by Dangote Cement Ghana Limited, a subsidiary of Dangote Cement Plc. In terms of pricing, the higher quality of Dangote Cement (42.5 grade) is still cheaper than the 32.5 grade produced by Ghacem.
The Dangote Cement Plant at Ibese is the largest cement plant in Africa.
The plant alone produces 240 million bags of cement daily and export parts of it to the Ghanaian market. The $1.5 billion plant, which started operations in 2011, has provided 1,700 direct jobs and 2,000 indirect jobs to the masses.
The company, owned by Africa’s richest man, Aliko Dangote, is embarking on an expansion programme in Ghana that required a massive recruitment exercise. As part of the expansion programme, the company in July this year recruited 1,000 more Ghanaians drivers into full- time employment and each of the newly recruited drivers was assigned to one truck.
Its cement terminal at Tema employed 2,000 people including the drivers.
The total workforce of Ghacem and Diamond Cement is around 3000. The Media Relations Manager of the company in Ghana, Etornam Komla Buami, told Business Day that many indirect jobs would also be created in the expansion programme, indicating that, Mr. Dangote’s objective of contributing to Ghana’s economic growth through job creation and honouring tax obligations was on course.
Dangote Cement has also increased its storage capacity at its terminal in Tema to purposefully serve the growing demands for its cement brand. Meanwhile, work on the company’s $100 million Takoradi plant is expected to be completed next year.
The quality of Dangote Cement
After a brutal battle against various cabals in the cement industry to make the African continent self-sufficient in the production and supply of the essential commodity was fought and won about three years ago, a fresh challenge emerged and that is the regulation of cement quality.
Many African countries including Ghana had been plagued by repeated building collapses and construction failures for years and the quality of cement used in construction activities came under severe scrutiny.
To the arrest of the problem, allegedly caused by the preponderance of lower grade (32.5) of cement in the market, Dangote Cement announced the completion of the calibration of its factories across the country to produce 42.5 grade, as well as 52.5 grade of the product.
With this, the company becomes the first cement company in Africa to achieve the feat. According to the media relations manager, the company’s product is doing well on the market and that many building contractors prefer using “our highest cement grade of 42.5R”.
Mr Buami explained that the new cement could be used for all construction purposes, adding that, it was the best for any civil construction having bearing column.
Contributing, the Plant Director at Dangote Cement Plc at Ibese, Nigeria, Armando Martinez Gallegos, said Dangote Cement was also the first to produce the 42.5 grade, while other manufacturers were churning out 32.5 grade, pointing out that the desire to constantly research into how to improve the quality of its products necessitated the new cement grade.
“Dangote Cement is the best product in Africa as it meets European standards,” Mr Armando stated.
Dangote shakes Kenya’s cement market
Nigeria’s Dangote Cement has started its shake-up of the Kenyan market with imports of the commodity from its plant in neighbouring Ethiopia as it prepares to establish a local manufacturing plant.
Dangote’s targeting of the Kenyan consumer with low-cost cement from Ethiopia is expected to further drive retail prices downward in a market where they have remained static for nearly 10 years.
Importing cement into Kenya is seen as Dangote’s short-term market entry plan as it prepares to establish a local plant in 2019.
“In addition, we have begun exporting cement to neighbouring Kenya,” the company, which is owned by Africa’s richest man, AlikoDangote, said in its latest trading update.
Dangote said the cement exported to Kenya is priced at about $74 per ton, making it up to 40 per cent cheaper than locally manufactured brands.
The price is expected to incorporate the cost of transporting the cement to Kenya as well as taxes where applicable, while still leaving the company with a profit.
Dangote, which plans to topple LafargeHolcim as the largest producer of cement in Africa, rides on economies of scale to set lower prices that in turn grows its market share.
Its plant in Ethiopia has an annual production capacity of 2.5 million tons. However, cement industry sources said the exports mainly covered supplies to road construction projects in northern Kenya.
Dangote also started selling cement in Tanzania early this year after completing its factory in Mtwara about 400 kilometres from Dar es Salaam.
The company cut prices in Tanzania to rapidly gain market share at the expense of rivals, including Kenyan multinationals with a presence in that market.
ARM Cement said in a commentary accompanying its latest results that cement prices in Tanzania fell by a third in the half year ended June as a result of Dangote’s entry.
Dangote said in the trading update that it took market share from its competitors in Tanzania despite incurring higher transport costs since its factory is located relatively farther away from Dar es Salaam.
“We estimate that in June we achieved 23 per cent market share across Tanzania and were the leading supplier of cement in the key market of Dar es Salaam,” Dangote said. The Nigerian firm’s price in Tanzania stood at about $80 per ton in June, undercutting its competitors by more than 20 per cent.
The company is expected to replicate its lower-pricing strategy in Kenya when it starts to produce cement locally in 2019.
Dangote, which already has a licence to prospect for limestone in Kitui, says it has revised the upcoming factory’s annual production capacity to three million tons from the previous 1.5 million.