Production of tiles and bricks at Uganda Clays’ new factory in eastern Uganda has started.
The factory was built in response to rising regional demand, which has led to a supply deficit and increased opportunities for smaller, aggressive rivals to claw their way into the market.
Uganda Clays Ltd is the country’s largest maker of tiles and bricks.
The new factory at Kamonkoli, just outside Mbale, opened at the beginning of this month.
It has a projected output of 20,000 tonnes for both bricks and tiles this year.
The factory cost an estimated $15 million, 55 per cent higher than the original estimate of $9.7 million.
This was due to additional expenses incurred in purchase of raw materials like steel, whose price rose last year, and higher interest rates on bank loans starting early this year.
The company’s older production plant in Kajjansi, a few miles from Kampala, produced an estimated 50,000 tonnes of bricks, tiles and max pans in 2008.
Max pans are special bricks for laying foundation floors and the floors of multi-storeyed buildings.
The demand for Uganda Clays’ products is currently 100,000 tonnes, much of which is attributed to a construction boom in Southern Sudan, particularly for max pans.
This has partly led to a supply deficit of 30,000 tonnes for the company’s products, prompting the management to consider expansion of the new factory in 2010.
Small but aggressive rivals have been exploiting the company’s limited capacity to meet the needs of the lucrative construction industry.
Uganda’s construction industry has been growing at an estimated 13 per cent a year, while Uganda Clays accounts for over 70 per cent market share of the tiles and bricks market.
The new factory will offer new jobs at a time when the global economic crisis is forcing many companies to shut down.
The company’s chief executive officer, John Wafula, says: “The construction boom in our regional markets will protect our profits from the effects of the global crisis.
“Demand for our products is currently at 100,000 tonnes.
“This has prompted us to start expansion of the new factory next year to help us cope with the rising demand.”
UCL also hopes to establish other regional production units in western and northern Uganda to reduce the supply deficit.
Feasibility studies for another production plant in Bushenyi, western Uganda, are in progress, while Pakwach in northern Uganda has been identified.
Plans to establish similar operations in Rwanda hit a snag last year following rejection of the company’s joint venture proposal by the Rwanda Enterprise Investment Corporation.
The company then sought alternative opportunities with local players in Rwanda, its second largest regional market after Southern Sudan.
Uganda Clays is still consulting with a Rwandan tile and brick manufacturing firm in Ruliba, a few miles from Kigali, on joint operations.
The new Kamonkoli factory, though smaller than the Kajjansi one, is more automated.
It is more efficient, has shorter production cycles and less wastage.