Competition pushes down price of cement in Uganda
Tuesday October 15 2019
Prices of cement in Uganda have been on the rise due to increased demand in the construction industry and statistics show that the cement sector expanded from 23 per cent to 30 per cent, with mega projects like Karuma and Isimba dam taking a bigger share of the supply. FOTOSEARCH
The entry of Simba Cement and Kampala Cement has increased competition among manufacturers in Uganda, driving down prices.
A 50-kilogramme bag now retails at an average price of Ush28,000 ($7.5) from Ush39,000 ($10.8), with some brands costing even lower.
Hima Cement and Tororo Cement have been dominant market players.
The drop in prices has been long coming following last year’s drastic measures by Ministry of Trade, Industry and Co-operatives to fast-track licensing of new cement manufacturers. Removal of 10 per cent import duty on clinker has also lowered production costs.
Some manufacturers rely on clinker as a raw material in their cement production while Tororo and Hima rely on pozollana mining in Kasese, Kamwenge and Tororo, where they mine their raw material.
Besides, the government had threatened to allow imported cement to come into the country on a special duty if the two major manufacturers, Hima and Tororo cement, did not increase production to bring down prices.
The two companies had cut production, citing high production costs occasioned by high electricity tariffs and taxes on imported clinker.
Commissioner in the directorate of geological surveys and mines Zachary Baguma said: “Four cement factories are now operating in the country, generating competition that has stabilised prices that were previously monopolised by Hima Cement and Tororo Cement.”
Prices of cement have been on the rise due to increased demand in the construction industry and statistics show that the cement sector expanded from 23 per cent to 30 per cent, with mega projects like Karuma and Isimba dam taking a bigger share of the supply.
The cement demand from neighbouring Democratic Republic of Congo and Rwanda has also been growing.
The oil and gas industry is also expected to create fresh demand for the sector’s construction works.
Besides Simba and Kampala Cement, more cement factories are likely to be licensed, and existing plant expanded.
In June 2018, for example, Hima Cement commissioned its $40 million factory in Tororo that is now producing an additional 0.8 million tonnes per annum. This is in addition to 0.9 million tonnes produced at the Kasese based plant.
According data released earlier in the year, cement manufacturers in East Africa are staring at dwindling sales, rising operational costs and plummeting incomes this year.
Africa’s largest cement manufacturer, Dangote, said its Pan-African operations have produced mixed fortunes having posted flat sales growth in 2018 led by Tanzania and Ethiopia which reported a decrease in sales.
Dangote’s cement sales volumes in Tanzania declined from 757,000 tonnes in 2017 to 625,000 tonnes in 2018 only a few years after it entered the East African market with high level optimism.
The decline was attributed to long delays in installation of gas turbines at its Mtwara plant, that forced it to reduce production.