With a deal worth millions of dollars in its pocket, the Ugandan subsidiary of French-Swiss cement giant Lafarge Holcim is leading the pack in the local content race to supply the large infrastructure projects that the country is undertaking.
Hima Cement, which produces 850,000 tonnes annually, signed a memorandum of understanding with the China Communication Construction Company (CCCC) on July 12 to supply 120,000 tonnes of cement for three public projects — construction works for the expansion of Entebbe International Airport and two road projects.
Under the MoU, Hima will in five years supply 30,000 tonnes of cement (out of the required 50,000 tonnes) for the Entebbe Airport expansion works, which started in May 2016; and in three years supply 60,000 tonnes for the Mubende-Kakumiro-Kagadi road project and 30,000 tonnes for the Soroti-Mbale road works.
In an industry that has in recent years witnessed growing competition from new manufacturers and cheap imports from Egypt, Pakistan and Kenya, the deal is a coup against competitors.
Contractors undertaking the large infrastructure projects, especially hydropower dams, roads and bridges, previously preferred to import cement and steel, citing the low quality of locally produced materials.
The CCCC Uganda acting country manager Zheng Biao says his company’s collaboration with Lafarge Holcim at a global level gave the Chinese firm confidence that Hima would be the perfect local content partner.
But sources say that the Chinese demanded certain improvements and quality assurances from Hima in order to clinch the deals.
“We have had to undergo research and development for the particular cement that they need for these projects,” said Allan Ssemakula, Hima Cement commercial director.
With demand for cement in Uganda standing at about 2.5 million tonnes per annum, there are fears that Hima’s focus on public projects could cause a cement shortage.
But the firm is ramping up its production to a million tonnes per annum, with a $40 million grinding station in Tororo, eastern Uganda, which is set to start production in March 2018, to boost the company’s capacity at its plant in Kasese district, southwestern Uganda.
After investing in research and development that improved the quality of their cement, the Lafarge subsidiary has since 2013 supplied other large infrastructure projects that the government is undertaking.
The Chinese contractor will also source steel locally while other companies will supply raw materials like sand, ballast and asphalt for the construction works.
“For our projects, we ensure we source these from local suppliers in line with the government’s ‘Buy Uganda, Build Uganda’ vision. This MoU reaffirms CCCC’s commitment to local content, which is a catalyst for job creation, better income and standards of living for citizens,” Mr Biao added.
The Uganda government has been under pressure from the private sector to create a window for local firms to participate in the road, railway and hydropower dam projects, as well as the oil and gas sector.