Cement output set to hit 7 million tonnes

Annual production of cement in Tanzania may soon exceed six million tonnes, twice the country’s current demand of three million tonnes, thanks to increased investment in the industry.

Dangote Cement, on May 28, this year, started construction of a 500 million US dollar (over 800bn/-) cement plant in Mtwara. Construction of the three million tone plant is scheduled for completion by March 2015.

Major cement companies currently operating in the country—Tanga Cement, Tanzania Portalnd Cement Company and Mbeya Cement—have all embarked on ambitious expansion programmes.

There are also some small scale new entrants in the industry as well. Projections show that within the next four years cement output may reach seven million tonnes, up from the current 2.5 million tonnes, according to industry sources. 

Several local cement companies are, however, not happy with the situation on the domestic market, particularly on the rising incidents of smuggling through Zanzibar and under-invoicing of imports.

“The government is losing billions of shillings in revenue every year through under-declaration of import values. “In addition ...most of the cement being imported comes from countries like Pakistan where the government offers its firms improper and unfair export incentives,” says Tanga Cement Company Limited (TCCL) Managing Director Erik Westerberg.

“Within the World Trade Organisation (WTO) there are rules against this practice. Relevant authorities must act to bring this to an end so that there is level playing field on the ground,” he adds. TCCL is among listed companies on the Dar es Salaam Stock Exchange (DSE), where it trades its shares as Simba.

The Tanzania Portland Cement Company (TPCC) also trades equities at the bourse as TWIGA. Mr Westerberg suggests that to bring the domestic market under control, relevant government authorities should see to it that correct tariffs were being applied, warning that there were importers who take advantage of “Duty and VAT exempted projects to smuggle in the product.

“These importers get some tax relief, but throw back the products into the market,” he says. Uncontrolled importation of cement is also associated with accidents such as collapse of some high rise buildings, where various stakeholders are now calling upon the Tanzania Bureau of Standards (TBS) to aggressively monitor quality of all imported goods.

Commenting on the government’s 2013/2014 budget, Mr Westerberg says he was impressed with efforts to improve roads, electricity supply, railway and ports. “Efficient transport and reliable power supply will help manufacturing firms to cut costs of production,” he says.

A functional railway is important in moving products in a cost efficient way and will largely open up trade with land locked countries like Rwanda, Burundi and the Democratic Republic of Congo (DRC). Tanzania’s economy is to a large extent driven by agriculture. With good infrastructure, farmers will ably take their produce to the market, not only increasing food availability but also improving the farmers’ earning and keeping price levels on a reasonable level.

He, however, points out that the increase in fuel levy would affect more of large scale investment projects. Most of the time, increased cost of fuel pushed up other costs as well. Review of tax exemptions offered to firms registered under the Tanzania Investment Centre (TIC) for items that were earlier categorised as “deemed capital goods” has affected cement manufacturers.

“Tanga Cement is being affected at the time when we are about to embark on expansion projects. “Potentially this could discourage investors when contemplating expansion projects. We are waiting to see the list of items that the government will publish that do not fall under capital goods and give more views on this,” he explains.

He says there were many ways to improve the cement industry in Tanzania, but infrastructural issues such as energy, rail and ports are of crucial importance.

“If electricity produced by TANESCO could be reliable, of good quality and available at reasonable cost, the local cement producer, would have fair operating environment. “Railway operation as well as port improvement is the major areas that should be looked at by the government in order to improve the local cement industry,” he explains.
Source: The Daily News, reported from Dar es Salaam, Tanzania

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