Feature

CIMERWA upgrade and resumption of production stabilizes cement prices

The pricing of cement a major input in Rwanda’s construction sector has started stabilizing following the resumption of production by the country’s largest producer. In the context of Rwanda’s economy, local production of cement is considered a key element of aiding growth of the construction sector. The ongoing construction boom is a key element of Rwanda’s high paced overall economic growth.

CIMERWA a partner of PPC Ltd the largest cement producer has resumed its production operations and carried out plant upgrade at Bugarama Rusizi district thereby leading to stabilization of cement prices.

Price stability comes following increment of prices in the last 3 months which was induced by shortage of the commodity in the local market.

The shortage was occasioned by the temporary closure of production by CIMERWA’s plant for its annual maintenance as well as planned upgrade and inability by cement importers to plug the short term gaps, according to those familiar with the matter.

The management of CIMERWA says that it invested $3.8 million to carry out upgrade during its scheduled maintenance of the factory that is meant to increase its production capacity by 30 per cent from 400,000 tonnes to almost 520,000 tonnes annually.

“The latest upgrade increased the CIMERWA plant to reach over 80 percent of its installed capacity thereby enabling the company to replace its outdated technology that has been limiting its production capacity and increasing the cost of operation”

, CIMERWA CEO Bhekizitha W. Mthembu says during the company’s latest press meeting.

Due to cement’s strategic importance in the economy, the rising prices forced other stakeholders in the construction sector especially the government to move in to regulate its pricing effective March 2018.

The price advisory by government was occasioned when the major players in the cement value chain CIMERWA and two major importers–met and agreed with the government of Rwanda representatives on the need to issue the price advisory. The advisory came in the wake of skyrocketing of a 50 Kg bag of cement prices in the market. The prices shot from approximately Rwf 8, 000 to Rwf13, 000 in the major distribution points in Kigali thereby giving room to speculative tendencies by traders and distributors.

The advisory signed by the minister of trade and industry Vincent Munyeshyaka and counter signed by CIMERWA CEO Bhekizitha W. Mthembu, was issued on 28th March 2018 read in part;

“The ministry of trade and industry wishes to inform the general public that pursuant to article 27 of Law no 15/2001 guiding internal trade that whoever will be found trading contrary to the stipulated guidelines will be penalized with a fine of Rwf 20,000 to Rwf 2 million depending on severity of the offence.”

Analysts are saying that dynamics in the cement sector closely reflect the ongoing construction boom; it is capital intensive with long term returns despite its very competitive nature.

There are two broad types of cement players in the Rwandan market. The first category includes the investors interested in manufacturing of the commodity locally. These are investors who are known to be casting a longer time horizon to recoup their on the ground investment.

Cimerwa office

In this category is the leading cement maker CIMERWA and second player Kigali Cement Co Ltd.

The second category includes the short time investors basically traders who are licensed to import the commodity with a view to plug shortages that local manufacturers are not able to meet. In this trader category are regional manufacturers representatives namely Twiga Ltd and Simba Ltd of Tanzania and Hima Cement Ltd from Uganda.

It is instrumental to note that as part of the new dynamic characterized by intense competition two major players seems to be jostling for market dominance.

In the game for jostling for market share in Rwanda pits La Farge of France the majority shareholders in Hima Cement Ltd of Uganda against South African cement giant Pretoria Portland Cement Co Ltd(PPC Ltd) the majority shareholders in CIMERWA.

In 2013, PPC Ltd took over CIMERWA in a deal worth US$170 million. The deal enabled CIMERWA to upgrade its production capacity to 600,000 tons up from 100,000 tons.

PPC Ltd’s investment was meant to satisfy local market through production of “made in Rwanda” branded cement thereby cutting Rwanda’s rising and huge import bill while exporting excess capacity. Increased production of the CIMERWA plant was meant to boost Rwanda’s foreign exchange earning capacity.

PPC Ltd anticipated that over 75 percent of CIMERWA’s upgraded capacity would satisfy the market while the balance would be sold in the neighboring markets.

4 years down the line, CIMERWA controls 60 percent of market share estimated at 600,000 tons annually and rising at over 20 percent courtesy of ongoing construction boom annually while the rest of the major players are left to fight for the balance 40 percent of the market share.

“Our investment is long term by nature and we are positioned to play a strategic role that goes beyond production of cement. We are placed to support Rwanda’s long term growth by assisting in its efforts aimed at cutting its rising import bill while increasing its export earnings,”

Cimerwa factory

Mthembu adds that the previous maintenance program was meant to not only carry out regular servicing of the plant but to increase its capacity. Mthembu says that the upgrade will enable CIMERWA to fortify its leadership position in the market with a view to curtail future shortages.

“The upgrade will enable us to arrest future cement shortages likely to be experienced during the scheduled maintenance period. This means that we will be in a position to improve plant equipment reliability and operational efficiency, and as such ensure that CIMERWA is geared up for the forecast increase in cement demand within the region.”

In Summary

  • The pricing of cement a major input in Rwanda’s construction sector has started stabilizing following upgrade and resumption of production by country’s largest maker.
  • In the context of Rwanda’s economy, local production of cement is considered a key element of aiding growth of the construction sector. The ongoing construction boom is a key element of Rwanda’s high paced overall economic growth.
  • CIMERWA a partner of PPC Ltd the largest cement producer has carried out an upgrade and consequently resumed its production operations at Bugarama Rusizi district thereby leading to stabilization of cement prices.
  • There are two broad types of cement players in the Rwandan market. The first category includes the investors interested in manufacturing of the commodity locally. These are investors who are known to be casting a longer time horizon to recoup their on the ground investment.
  • In this category is the leading cement producer CIMERWA and the second player Kigali Cement Co Ltd.
  • The second category includes the short time investors basically traders who are licensed to import the commodity with a view to plug shortages that local manufacturers are not able to meet.

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