Rwanda has a supply deficit in cement which is continuously frustrating the construction industry.
The country’s cement demand is estimated to be 800,000 tonnes per year against a domestic supply of 420,000 tonnes per year.
And, according to Cimerwa chief executive officer, Albert Sigei the cement market is expected to grow by close to 10 per cent.
Cimerwa is Rwanda’s largest cement factory.
“Our capacity is 600,000 tons per annum. So we do not supply the whole 800,000 because it is more than our capacity,” Sigei told The New Times this week as the company officially listed on the Rwanda Stock Exchange.
Cimerwa caters to about 50 per cent of the domestic market, with the rest covered by imports.
“The biggest challenge (with relying on imports) comes around supply chain shocks. This is because getting a bag of cement then means you rely on factors outside your territory,” Derrick Nkera, an expert in the construction sector says.
That, he added, may cause supply shortages, delays on construction sites, and even determine the pricing of cement and even projects, simply because cement is a primary product in construction.
Nkera points out that in the last one year, there have been price hikes on two occasions - when Cimerwa was upgrading its plant and this year due to Covid-19. The cost of cement has gone up by an estimated 25 per cent compared to one year ago.
“That affects the whole work of construction because when contractors are valuing projects they base on the price of things like cement. When a contractor knows that the price of cement will increase, they will inflate the cost of the project,” he noted.
According to David Nshimiyimana, the head of the Institute of Real Property Valuers in Rwanda (IRPV), unstable prices of cement have a ripple effect on the valuation of properties.
“A multi-storey building constructed today will consume a lot of cement because it is made out of concrete. The value of that property will be different from the value of the same complex built two years ago because of cement prices,” he said.
Bridging the gap
As Cimerwa listed on the local bourse this week, the question has been whether the country can get enough supply of cement.
Venant Bahizi, a construction expert, asserts that high levels of investment required for cement production, have kept private investors away.
“The initial investment in cement is high. Even those that may want to invest in that space needs the hand of the government,” he said. “Yet, the government cannot have two competing cement businesses.”
With the booming construction sector and real estate development, demand for cement will increase even more, which pauses a question of who will serve that demand.
“We shouldn’t have 50-50 supply, instead we should have at least 80-20,” Nkera suggests, referring to the fact that instead of producing 50 per cent of local demand, the country should increase its capacity to produce at least 80 per cent of the local demand.”
The demand for cement is expected to continue growing, driven by different projects including the construction of new cross border markets, and new ports on Lake Kivu in Rusizi, Nyamasheke, Karongi and Rubavu districts.
Construction and development of industrial parks, and expansion of the Kigali Special Economic Zone, as well as scale-up of electricity generation and improvement of quality, affordability and reliability of supply will spark demand.
This is in addition to servicing of new residential zones and paving of urban roads.
The entry of Prime Cement, however, is expected to play a big role in contributing to bridging the existing gap.
The newly-completed Musanze-based cement plant worth Rwf37 billion is expected to start operations in August.
The plant comes at a time a big number of construction projects were either put on hold or seen budgets on construction projects going significantly up as a result of cement shortage on the local market.
“We believe the new player will help us to bridge the existing gap that we have, and reduce the deficit caused by high cement imports,” Gaudence Mukamurenzi, the commodity value chain trade specialist at the Ministry of Trade and Commerce, noted.
The cement plant, which has been under construction since August 2018, is expected to start operations with a projected production capacity of 50,000 tonnes per month (approximately 600,000 tonnes per year).Follow https://twitter.com/Julio_Bizimungu