Ethiopia’s Cheap Electricity Helps Dangote Shake Up East Africa’s Cement Market

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Written by Kevin Mwanza

A cheap electricity deal that attracted Africa’s richest man, Aliko Dangote, to set up a cement plant in Ethiopia could have a big impact on the cement market in East Africa as the Adaberga wereda-based plant starts exporting cement at almost 40 percent less than regional manufacturers.

To attract Dangote to the East African country, the government offered to supply his company with electricity at a discounted rate of “three cent per kilowatt hour” in exchange of him building a plant there.

This enabled Dangote Cement to cut the cost of producing a ton of cement by 60 percent, Nigeria’s former central bank governor, Sanusi Lamido Sanusi, said in a speech published by Premium Times.

“For a cement manufacturer, that is all the incentive that you need,” Sanusi said, adding that this helped the construction industry in Ethiopia to boom.

The low-cost cement is now being exported to neighboring countries like Kenya, where retail prices have remained static even as competition increased in the sector over the last decade.

This is likely to shake up the regional cement market and make it affordable for construction developers to build more properties, Business Daily reported.

Dangote Cement, one of the largest manufacturer of the product in Africa, said in a statement last week that it had started exporting to Kenya at $74 per ton, nearly half of what local manufacturer sell their brands.

Dangote also started selling cement in Tanzania early this year after completing its factory in Mtwara about 400 kilometers from the country’s capital, Dar es Salaam.

Ethiopia, one of the beneficiaries of the Power Africa program, an initiative of U.S. President Barack Obama, has the highest electricity generating potential in East Africa due to its vast number of rivers and hilly terrain.

It has invested billions of dollars to build several hydro-electric power plants including what will be Africa’s largest dam — the Grand Ethiopia Renaissance Dam (GERD).