Cement

Zambia has experienced disrupting shortages of energy and cement during 2007 such that industry has had constant nightmares when it comes to business planning in the areas of continuity of production and cost of production irrespective of which sector one might want to consider. This across the board problem that manifests itself in the form of erratic electricity supply, or increased fuel prices, or shortage of cement, or increased cement prices plays havoc with all business plans and cash flows for most businesses.

ZESCO is attempting to stabilize the supply of adequate electricity by rehabilitating and upgrading various power stations in addition to embarking on the building of additional power stations at Itezhi-tezhi and Kafue Gorge Lower.

The issue of oil based fuels will continue plaguing us until INDENI oil refinery finds some serious investment and the world oil prices start to fall – an unlikely expectation for at least one more decade.

As for cement, we can actually do something about it.

At the moment the two major cement producers are based in Lusaka and Ndola. These two plants have been around for many years and have expanded only due to pressurized demand. Another small producer based in Lusaka probably outputs around 100 metric tons per day.

A huge opportunity exists for some new investment in the cement production sector. The mining industry is poised to grow exponentially in the next five to ten years. At the moment the existing mines are expanding their capacities and therefore require lots of cement to meet their construction needs. In addition, the new mining companies in the North Western Province and the Southern Province are going full throttle in building the mining infrastructure and will demand a huge amount of cement as they roll out. The growth in the economy is witnessing the building of new hotels, office blocks and housing estates in the strategic areas and the consumption of cement is escalating every day. Furthermore, the ZESCO program of expansion of our electricity production will demand vast amounts of cement as the different projects come on line. The two Economic Zones earmarked for Chambeshi on the Copperbelt and Chalala in Lusaka East will demand a lot of cement to see the intended construction work through. The indicators are there for all to see. A regional focus offers export opportunities for Zambian cement to South Africa where major construction of Stadia and transport systems are underway in preparation for the 2010 World Cup. Burundi, Congo DR, Tanzania, Angola and Mozambique are countries where economic development is on the increase and cement for construction will be required in large quantities.

This is the time for Zambian businesses to consider investing in this sector. This is the time for Zambia to attract foreign investment into this sector. This sector offers opportunities for Joint Ventures and other permutations such that Zambia can become the largest producer of cement in the region to supply the entire sub region covering SADC, COMESA, and the EAC.

The basic inputs for cement production are plentiful in Zambia. The technologies vary from small plants that produce 50 to 100 metric tons per day, to large installations that will produce as much as 2,000 metric tons per day. Cement production inputs include Limestone, Coal, Gypsum, and Clay. Zambia has vast reserves of these minerals and some strategic investment will render the cement industry self sufficient in raw materials.

Maamba Collieries is sitting on vast coal deposits that would both provide alternative fuel for the mining industry and other heat process manufacturing industries. Maamba Collieries can also provide much of the requirements for large scale cement production.

The current large investment in cement is expanding its production capacity to 2000 metric tons per day in an attempt to meet the growing demand. The fact is that there is, and will be, more than enough market for any new investor in this sector for some decades to come. The profile of the new investments in Zambia and the region that will require constant large volumes of cement, is that of businesses that are in for the long haul, and have chosen to put their investments in brick and mortar.

The current plans to regulate the number of registered sales outlets for cement is another restrictive and anti-development measure being considered between by the major cement producer and the Ministry of Commerce, Trade and Industry. The consequence of the shortage of supply of cement to the local market is seen in the high retail pricing of the commodity and a quickly developing black market. The stop gap solution may be to regulate the supply chain to the market, but experience tells us that as long as there is a buyer out there that is willing to pay more for the commodity, we can be sure that a black market price will prevail. The real problem is to address the shortage of supply. The existing producers should be persuaded to upgrade their production to meet the ever rising demand, and the Government through the Zambia Development Agency, should be going out full throttle to attract new investment and investors into the sector.

Several investments in cement production will benefit the cement consumer since broad and effective competition will be created, thereby developing a conservative pricing structure that will ensure a sustained and expanding local and regional market.

Published 18 December 2007