Dangote fever hits

 

Billionaire Aliko Dangote’s cement from his Zambia plant is out-pricing Malawi-produced cement, sending jitters across the local industry.

Business Review’s spot checks show that Dangote’s cement is at least K500 lower than local cement.

That means saving K5 000 for every 10 bags one buys, which some consumers say is a “huge” cutback when it comes to construction costs.

Some local producers have since cried foul, saying allowing imported cement from Ndola’s Dangote plant in Zambia-which has an annual production capacity of 1.5 million metric tonnes-could hurt the local cement industry and hit jobs hard.

They have since asked for government’s protection.

Dangote cement has taken the local market by storm
Dangote cement has taken the local market by storm

But the Ministry of Industry, Trade and Tourism-which issues import licences-says local companies should strategise to deal with the growing competition by, among other things, being aggressive on marketing and producing more efficiently.

And Malawian consumers Business Review talked to this week welcomed the competition and the lower prices that Dangote is offering on the local market, saying they have been subjected to expensive cement for too long.

The fears from the cement manufacturers come against the background of figures from the National Statistical Office (NSO) Statistical Bulletin for August 2016 showing monthly demand for the product pegged at 11 600 tonnes, surpassing output at 11 300 tonnes.

There has been an influx of cement mainly from Dangote Cement Company in Zambia, which is selling at K5 500 a bag in shops compared to the local product fetching between K6 000 and K7 500 a bag.

Between February and March this year, seven companies and businesses have been given cement import licences by the Ministry of Industry, Trade and Tourism to import 80 000 tonnes of cement a year into the country, which is equivalent to about 25 percent of Malawi’s cement demand at around 375 000 tonnes.

A snap survey by Business Review on Tuesday in some cement selling shops in Blantyre revealed that the imported product is selling like hot cakes and mostly runs out.

In an interview on Tuesday, Brian Govati, a businessperson from Machinjiri in Blantyre, said he uses imported cement in his construction projects because the price is lower and the product is durable.

“I use Dangote Cement because it is K500 cheaper than most of the local cement you find on the market and also because it is stronger unlike local cement,” he said.

Cement manufacturing firms have attributed the higher price of local cement to high cost of production. They argue they import raw materials from Middle East, Zambia and Mozambique.

Cement Products Limited (CPL) chairperson Aslam Gaffer, in an interview, said despite efforts by the local cement manufacturers to compete on the market, the influx of cheap cement has been affecting them because they cannot compete fairly due to high cost of production, which increases input costs.

“We are operating far less beyond capacity in all our three plants because of the influx of dumped cement on the market. They have oversupplied the Zambia market because of the coming in of Dangote Cement on their market and they are extending it to Malawi.

“Prior to that, the price of cement was between $9 [K6 570] and $10 [K7 300], but when he [Dangote] came on the market, the prices dropped to $5 [K3 650] at wholesale. In any production line, the most expensive thing is logistics, but we find that Dangote Cement is selling at $5 a bag in Malawi just as in Zambia, which is stiffling, our business,” he said.

Gaffer said despite lodging complaints to the BUSINESS 2

Ministry of Industry, Trade and Tourism, nothing has been done to address their concerns.

He said local cement manufacturers import clinker from Dubai in the United Arab Emirates, which also pushes up cost of production, saying it is discouraging to have such kind of market behaviour.

Shayona Cement Company public relations officer Rownald Mwalweni said they are reluctant to produce to their optimum capacity because of the influx of the cheap imported cement.

He said the company has about 1 300 employees while CPL, according to Gaffer, has about 200 workers who may be at risk of losing their jobs.

LafargeHolcim Malawi officials were not immediately available for comment this week.

But in an earlier interview in May this year, the company’s chairperson Symon Msefula said while they welcome competition, livelihoods and future of more than 5 000 households that depend on the company are threatened due to imports that have created an uneven playing field.

That figure includes 15 transporters, 58 active distributors and 91 employees, according to Msefula.

Southern African Development Community (Sadc) and Common Market for Eastern and Southern Africa (Comesa) rules are unclear on how to regulate such price differentials even as they promote free trade.

In one breath, Article 25 of the Sadc Trade Protocol (STP) states that member States shall implement measures within the community that prohibit unfair business practices.

In the other, it states that member States should promote competition and also provide a framework of trade cooperation based on equity, fair competition and mutual benefit.

On the other hand, Article 51 of Comesa Treaty states that member States recognise that dumping, by which products of a member State are introduced into the commerce of another member State at less than the normal value of the products, be prohibited if it causes or threatens material injury to an established industry in the territory of the other member State or materially retards the establishment of a domestic industry.

The contentious phrase here is “less than the normal value of the products” as determining what the normal value is could be tricky. Indeed, it remains unclear whether the importation of Dangote cement could constitute dumping.

Wiskes Nkombezi, spokesperson for the Ministry of Industry, Trade and Tourism dismissed allegations that the country has become a dumping site for Dangote cement.

“We have been having imported cement for some time now and we see nothing wrong with this imported cement. Let them [local companies] be aggressive enough to claim the market,” he said.

In a separate interview, Consumers Association of Malawi (Cama) executive director John Kapito emphasised the need for government to properly look at protecting the local industry, which he said has created job opportunities for Malawians and contribute towards the growth of the economy.

The issue has attracted the attention of Competition and Fair Trading Commission (CFTC) and its director of consumer welfare and education Lewis Kulisewa yesterday said they received a complaint and have referred the matter to Comesa Competition Commission since the issue involves a company resident in a Comesa member State.

Share This Post

Powered by