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Is Cement The Next Hot Industry In Africa?

Is Cement The Next Hot Industry In Africa?

The strategy could be a source not only of stability but of competitive advantage. Ncalo notes that Dangote’s plants will, as a result of their investments, become “dual power,” meaning the firm can switch between sources “depending on supply and depending on the price of each commodity, which will make them more competitive going forward.”

Another important issue hinges on transport.

“Distribution within Africa is still challenging and expensive,” says Harris. “There is a distinct lack of the critical transport infrastructure required to facilitate economic expansion.”

Cement is cheap, but it is heavy, and “the more you move [it] around the higher the price to the end user,” says Ncalo. “Getting product across borders in Africa takes a lot longer and is probably more expensive than most places in the world.” And the problem doesn’t just lie across borders, but even within nations. 

That means that locating plants and minimizing transport costs are a critical part of the equation for any firm wishing to compete. “Our preference would be for cement companies to roll out as close as possible to markets” to reduce costs, Ncalo says. “We believe the key strategy is to find the limestone deposits and produce nearby, which is cheaper, and to sell to the market nearby.”

After all, he says, “the bottlenecks across the borders in Africa will still be a problem for a while.”

Finally, there is the issue of imports.

Many countries continue to import cement from producers in Asia, such as Pakistan. But Nigeria has seen a sea change in its cement industry after banning cement imports. “If you look back four years [Nigeria] was the largest importer of cement in Africa, and it’s now a net exporter. They’ve been very successful at promoting export in the country,” according to George.

African-produced cement

Will other nations favor African-produced cement or will the industry continue to face competition from abroad?

“A lot more countries across Africa want to allow the local cement industry to flourish,” says Ncalo. “You’ll probably see a lot more protectionist policies across Africa.” Regional production and more convenient transport could also improve local competitiveness. “As you see more cement production in Africa you’ll see that limits importation,” he says.

After all, he notes, production costs drop once ready access to limestone (the key raw material in cement) is established and transportation costs are reduced.

On top of the analytics, the big picture statistics loom large. Quite simply, Africa needs to build, and to build it needs cement. Ecobank points out that even in Nigeria, the continent’s largest cement consumer, demand currently sits at 278 pounds per capita, compared to a world average of 1,102 pounds per capita.

Headwinds notwithstanding, for the continent’s major cement producers, including rising star Dangote, numbers like these can only herald opportunity.