Lafarge, Dangote Scramble For Zambian Cement Market

Lafarge, Dangote Scramble For Zambian Cement Market

According to Bloomberg one of Africa’s largest cement producer, Lafarge, is locked in a fight for its dominant market share in Zambia with Africa’s richest man’s Dangote Cement, owned by Nigerian Aliko Dangote.

Last week Lafarge said it had started work on a $217 million cement plant in Lusaka to be completed in 2018 in what industry analysts see as a move to counter Dangote Cement’s $400 million plant that started production in March.

Dangote’s plant has a capacity to produces 1.5 million metric tons of cement per year, more than the 1.2 tons Lafarge’s two existing plant produced last year. The new plant will however boost Lafarge’s production by up to 1 million metric tons.

Emmanuel Rigaux, chief executive officer of the Lafarge South Africa unit, said the expansions won’t cause an oversupply, mainly because of high demand from the neighboring Democratic Republic of Congo.

“The growth there is massive, in fact it’s even higher than in Zambia,” Bloomberg quoted Rigaux saying. The DRC “has one of the lowest cement consumption per capita and one of the highest growth rates in the world,” he said. “It’s a perfect combination.”

Lafarge’s share has however bared the brunt of pessimistic investors who expected the company’s profits to dip in coming years as it haggles for a better pricing with Dangote Cement.

This price was, combined with a slowing economic growth in Zambia as the government grapples with a budget deficit that helped push the kwacha to a record low last month, are seen as a risk by investors.

“We’re going to see pressure for Lafarge to reduce their prices. We anticipate reduced profit margins for Lafarge. Definitely there is a risk of getting an oversupply,” Brian Chintu, head of investments at Madison Asset Management Co. in Lusaka, told Bloomberg.