Kenya’s cement industry, the largest in the region, is eyeing various large scale projects across East Africa to drive its expansion and turn in a windfall.
Housing development in Kenya and Tanzania has been driving industry demand considerably, but this matrix is expected to change with increased government capital expenditure in the transport sector. Such infrastructural development projects include building a standard gauge-railway running from Mombasa to the western border town of Malaba, expanding Kenya’s main airport, and constructing a new port at Lamu.
“We are experiencing strong demand in the housing sector in the region but this is because most of the [government] infrastructure projects are yet to pick up,” Prandeep Paunranha, Managing Director of Athi River Mining (ARM) told AFK Insider in a phone interview.
He disclosed that at present, demand for cement by contractors in the urban housing sector comprises 60 percent of what ARM delivers to the market. Rural housing accounts for 25 percent while infrastructure projects cover the remaining 15 percent. This pattern of consumption is replicated across markets in East Africa including Uganda and Tanzania.
ARM estimates that while the annual demand for cement in East Africa is nine million metric tons, only four million are produced in the region; making up for the deficit by importing from Asia and other African states such as Egypt.
“We are in the process of putting up a two million ton cement plant in Kenya, around 2014 to meet growing demand,” Paunranha said.
Officials at ARM said construction and expansion works at Tanzania’s seaports of Tanga and Dar es Salaam in addition to Rwanda’s booming housing sector and hydro plants will drive the firm’s growth this year.
ARM is considered a key player in the East Africa cement manufacture business. In the six months ended June 30, 2013, ARM made a 28 percent increase in pre-tax profit from $9.3 million to $12 million. Its turnover increased from $60 million to $76.5 million during the same period.
Statistics from the Kenya National Bureau of Statistics (KNBS) show that in January 2013, 375, 720 metric tons of cement were produced in Kenya against a consumption of 324,095 tons. In February, this figure dropped to 375,237 metric tons against consumption of 331,961 metric tons. In 2012, cement production reached 4.6 million metric tons against consumption of 3.9 million.
The East Africa region has a severe cement deficit but the opportunity isn’t fully seized by investors and local manufacturers.