CHEAPER CEMENT FROM CHINA, INDIA AND PAKISTAN LEADS LOCAL PRODUCERS TO . . .
*Tanga, Mbeya cement suspends production
Local cement industry is going through turbulent weather as major producers are closing down in a move that paves way for market dominance by imported cement from China, India and Pakistan.
The shut down of two, out of three major cement producing companies in Tanzania came amidst news which reached Business Times this week, that two new prospective investors, Maweni Limestone Limited of Kenya and Dangote Limited of Lagos, Nigeria, have canceled their investment plans in the country.
Mbeya Cement Company Limited belonging by 62.7 percent share to the multinational Lafarge Group of France, became the first to suspended production three weeks ago, 'forcing' its 200 employees to go home.
The jobs of other 5000 people involved in business with the company like transportation and gypsum mining have been uncertain since then.
Managers of Mbeya Cement refused to talk about reasons for the shut down. But sources had told Business Times that the company's go-downs were full of cement that failed to compete in the free market.
Problems at Mbeya Cement aggravated since last year when the government suspended duties on imported cement, to create room for competition that would relieve consumers of heavy burden on their shoulders.
The total imports of cement into Tanzania were 30,000 tons in March this year. While cement from India, China and Pakistan started flooding the market Twiga Cement, a close competitor of Mbeya Cement doubled its production capacity and reduced the price of its cement to reach TZS 11,000 per 50 kg bag in Dar es Salaam.
Tanga Cement Company Limited (TCCL), also increased capacity, worsening 'trouble' for Mbeya cement, which finally had no option but to close.
But Tanga Cement itself couldn't survive substantially long. The second largest producer of cement in the country, suspended production on Wednesday this week, after its go-downs became over-flooded with cement.
In an exclusive interview with Business Times, Tanga Cement Communications Manager, Kati Kerenge, said “we have decided to shut down our factory since our storage facility is full. To be honest this has never happened and because of that we can not continue with the production.”
According to her, about 60 employees have been sent home and the jobs of thousands people involved in business with Tanga Cement including the gypsum miners among others are now on the line.
Asked when the situation will calm down, Kati said: “ it will depend on the action taken by the government on this matter.”
For years the price of cement in the country has been exorbitant, leading to overwhelming complaints to the government by consumers.
The existing local major cement producers have always wanted to maintain some kind of monopolistic position in the market. Hardly four in number, Tanzania's cement giants which appear to have ties with other producers in East African sub region, had always determined prices that made life to consumers difficult.
Decision by the government to lower cement import charges was meant to assure advantages to consumers.
Local producers have strongly showed disapproval of the government's decision to suspend restrictions on importation of cement into the country.
Basing on claims of expensive power supply system in the country and presence of 'dumping' game in the market (with imported cement getting government subsidies in source countries) local producers have been quoted as arguing the current market situation is unfair to them.
Who tells the truth?
The government has maintained that local cement producers whose profits have never lowered (as evidenced by the dividends paid to their investors), have no substantial reason to demand for re-imposition of import duty on foreign cement.
A senior businessman in the country (name withheld), commended the government's strategy saying it would make local cement manufacturers become more efficient and producers of quality products.
“It's wrong to protect our industries. Firstly we are one of the members of World Trade Organization (WTO) and sooner or later next year we will join the Customs union whereby everything imported would be at zero tariff. The problem is that our industry does not want competition from abroad they want to dominate and set prices, which is wrong,” he said.
“We should be careful. How come a bag of cement coming all the way from Pakistan should sell cheaper than one produced in Tanga?” he said.
Talking of Maweni Limestone Limited which plant establishment in Tanga and Dangote Limited, a subsidiary of West Africa's conglomerate Dangote group, that intended to invest in Mtwara, the businessman said the 'newcomers' might have threatened to cancel investment plans 'as a token of solidarity with their fellows'.
“They know they will also benefit from protection once the government bows to them. That's bad” he said.
Prior to cancel plans, Maweni Limestone Limited, a subsidiary of Athi River Mining co. of Kenya, was expected to commence operations in October 2010. Its ground breaking ceremony was attended by President Jakaya Kikwete in Tanga last year.
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