the local construction and real estate sectors have registered enormous growth rates over the past decade, a situation that hiked cement demand. However, what is manufactured by the existing producers does not meet market demand, with experts predicting the supply gap to continue widening in the next few years.
This (shortfall) has also attracted regional firms to expand operations in the country to serve the growing demand for cement that presently stands at over 450,000 tonnes per year. Of this, local producers can manage only 400,000, with Cimerwa Cement contributing the biggest share of the cement on the market.
Cimerwa unveiled a state-of-the-art plant in Rusizi District, saying it had the capacity to produce 600,000 tonnes of cement annually. But figures from the firm, which is owned by South Africa’s Pretoria Portland Cement (PPC) group, indicate that the company makes just above half of its installed capacity at 60 per cent or 350,000 tonnes annually.
The other producer, Kigali Cement, a subsidiary of ARM Cement, is not known and the firm’s officials were cagy when asked about their output.
Bheki Mthembu, the Cimerwa chief executive officer, said country has experienced a construction boom over the past few years with government and private developers undertaking many big infrastructure projects, including the Kigali Convention Centre and Kigali Heights, among others. This, he added, has created huge demand outstripping the current production capacity of the two cement makers.
Mthembu said this challenges local players to devise more ways to raise their cement production capacity as construction and real estate project are implemented by different developers.
Need to increase output
“With the start of construction activities at the proposed Bugesera International Airport, demand can only go higher considering that there are already numerous ongoing projects, players like us have to do more.
This is why we have, in less than two years, grown six-fold in productivity,” he noted. Besides projects being undertaken by hospitality sector players, the affordable housing market segment is also growing with entry of more new real estate developers.
Cimerwa has not been producing at full capacity, according to the Pretoria Portland Cement Integrated report for 2017. The report shows that Cimerwa Cement sales were 310,000 tonnes by March, up from 124,000 tonnes in 2015.
The report shows that the firm was able to replace 20 per cent of coal use with alternative energy sources during the same period, and has migrated from thermal power (using diesel generators) to the hydropower.
According to the report, plans are underway to ramp-up operations and “optimisation will continue and the plant will be able produce at full capacity in the next two years”.
More cement makers plan entry
Annette Karenzi, the director general for industry and entrepreneurship at the Ministry of Trade, Industry and East African Affairs, said government is trying to attract more cement makers to boost production.
“Cement consumption is increasing and government is working hard to attract more cement manufacturers to set up shop in the country,” she said while commenting on the issue last week. A new player, Prime Cement, plans to establish a $65 million plant in Musanze. Early this year, Prime Cement announced plans to set up a grinding plant in Musanze District, Northern Province.
In fact, Milbridge Holding, a consortium that owns Prime Cement, signed a multimillion dollar equipment supply deal with FLSmidth Company, a Danish maker and supplier of cement equipment, in April.
The plant is expected to start operations next year. Karenzi also revealed that another firm is still in talks with the government to build a cement factory in a yet to be named place. It’s for developments like these that Ministry of Trade and Industry officials project an upward trajectory for cement production in the next few years “as more firms join the market”.
High cost, competition tightening
But some sector players say this is not enough, adding that the cost of cement is still high compared to other regions. Daniel Wyss, the managing director of Skat Consulting Rwanda, a Kigali-based Swiss firm specialising in low-cost housing solutions, said in the other markets in which they operate, cement is less costly compared to Rwanda.
He, however, acknowledges that cement prices have been going down over the past few years. Wyss believes that entry of more producers would help push down the cost of cement and, eventually, that of houses.
“It is crucial to be competitive in the region even when Rwanda still imports most raw materials,” he noted.
Some cement brands imported from neighbouring countries cost less than locally-made cement, which makes it less competitive.
Ministry of Trade, Industry and East African Affairs’ Karenzi advises local players to improve quality and review their pricing to remain competitive, adding that the government provides local producers the necessary incentives.
Rwanda’s cement import value dropped by over half to $42 million in 2016 from $80 million in 2015.
Mthembu said the firm is trying all means possible to bring down the cost of cement, but adds that they still face a challenge of high cost of production.
The official said Cimerwa used to import 80 per cent of the raw materials used in production, adding that they have devised efficient ways of production that have enabled the company to cut costs.
He said the cement maker still imports coal from Malawi and Tanzania, which is costly. But he is optimistic they will find alternatives to power production process at an affordable cost.