Uganda Clays Ltd plans to enter the regional markets via Rwanda, following heightened competition in Uganda, coupled with the closure of its South Sudan operations.
Its new target markets include eastern Democratic Republic of Congo, northern Tanzania, Rwanda and Burundi.
By press time, the Uganda Securities Exchange-listed UCL had not published its 2016 half-year financial results. In the year ending December 2015, the company posted a $2.3 million profit.
Rogers Mawanda, commercial manager and head of communications said that South Sudan was UCL’s second largest market, contributing 35 per cent of the company’s revenue, but when civil war broke out in the country in 2013, the firm closed operations in 2014. This has affected its financial flow.
Consequently, the company has been struggling to pay a $5.9 million debt from Uganda’s pension body, the National Social Security Fund.
But UCL’s financial position is improving going by its 2015 financial year results, with analysts saying the $2.3 million profit it made could be used to fund the expansion.
“The company’s cash flow continued to recover with a surge to $421,885 by the end of last year, widely boosted by $936,382 received for part of the company’s land in Kajjansi, central Uganda,” according to Crested Capital, a brokerage firm based in Kampala.
It is also understood that the UCL management is negotiating with NSSF to convert the debt into equity. The outcome of these discussions are yet to be made public.
In Rwanda, UCL will face competition from Ruliba Clays, a subsidiary of Crystal Holdings, a business arm of Rwanda’s ruling party, RPF. The plant, which has been building capacity over time, is a dominant player in industrial clay construction materials, producing some 140,000 tonnes of products daily.
The Kigali-based Ruliba also has a strong footing in all the markets that UCL targets, but its proximity makes the former more competitive.
Kajjansi, where UCL has a plant is over 500km by road to Kigali. This would mean that UCL may have to factor in transport costs under its plan to use outlets and agents to distribute its products.
People in Mbarara and Kabale — both in Western Uganda — for example, prefer to buy Ruliba construction materials rather than drive to Kajjansi. On average, it costs $4,050 to transport a 40ft container from Kampala to Burundi and DR Congo.
“Transporting a 40ft container from Kajjansi to Kigali costs $2,200, to the Kivus in DRC costs $5,000, Arusha, Tanzania $4,500, Bujumbura $4,500,” said Abdul Ndaru, the proprietor of TransAfrica Ltd, a transport and logistics company based in Kigali.