Cement wars heat up in East Africa as Dangote plans entry

However, he warns new entrants that cement pricing in East Africa is “probably the lowest in Africa in spite of our high cost of power, transport and all other costs associated with manufacturing”. The margins are “tiny” compared to what companies in Nigeria make.

He explains that cement manufacturers in Nigeria make a margin of $90 per ton while in Kenya a ton sells for $120 leaving a margin of less than $25.

“We are not concerned about competition. We believe we are able to build our plants very economically [and] we are able to produce high quality cement. We think our business will be very successful based on the economic growth the country and the whole continent is experiencing.”


But it’s not only in Kenya that Dangote will be facing off with the likes of ARM Cement. Dangote Cement is currently building a plant in southern Tanzania which will increase the country’s cement capacity by 1.5m tons by mid-2015.

ARM Cement is also building a $150m clinker plant in Tanga, Tanzania. This plant is expected to be fully operational by the end of July and will have an annual production of 1.2m tons of clinker.

As more investors tussle for a share of the growing market analysts have warned that Kenyan companies will be exposed by oversupply. Tanzania, a key market for Kenyan cement exports will have doubled production capacity after ARM Cement and Dangote Cement begin production.

Kenyan companies have for many years dominated exports of cement into the East Africa region. According to industry data, Kenya’s production has recorded an annual oversupply of 500,000 tons of cement in the last five years.

While Paunrana saw opportunity in the cement market many years ago he reckons ARM should have invested more in its cement business earlier on. “In hindsight, I would say that one of my career mistakes was not to see the pace of growth. We could have done more and better. We could have focused more and put more investment earlier in our cement business.”

Manufacturing clinker

In the face of growing competition, Paunrana explains that the firm’s strategy is to manufacture clinker which is then converted into cement. Most companies import semi-finished cement or clinker from China and the Middle East which is then grinded into cement.

“A clinker plant is really where the wealth is created because you are transforming raw materials from the ground all the way into cement finished product,” he says. “Our strategy is to manufacture clinker and capture the entire value chain. That gives us a clear advantage in our costing and an advantage in a market that is growing.”

The 2013 CW Group report noted that Kenya is still dependent on large clinker imports, with over 1.2m tons imported in 2012, mostly from China.

Citing Egypt’s consumption of 554kg/capita as of 2012, Paunrana notes that Kenya and other East African states have a long way to go and “cement consumption will keep growing for a long time to come”.