Tanga Cement
This extraordinary step, according to the Managing Director, Mr Juerg Fluehmann is due to flooding of the local market by subsidized cement from the East. “The unpredictable import policies, importation of subsidized cement and the uncertainties surrounding power supplies, make it impossible for us to commit to any further expansion at this time” Mr Juerg Fluehmann, said. The huge inflow of subsidized imported cement has caused the local cement producers to cut down productions, as in recent months some of the producers had to stop producing cement after the silos were full, he said.
The new facility would increase production capacity by 500,000 tons, from 750,000 tons to 1,250,000 tons per annum, representing an increase of 67 per cent which puts the company in a strong position, to meet the increasing demand of cement in Tanzania and its neighboring countries. This increase in capacity has seen the company raise its market share in Tanzania to 35%. Tanga Cement mainly sells its cement in the northern region of Tanzania covering Tanga, Kilimanjaro, Arusha and the Lake Zone. The company also exports to Rwanda and Burundi and plans are underway to export to DRC Congo.
Tanga Cement Company Limited recently commissioned a new mill and parker, but indefinitely put on hold the second phase of its expansion project which would have seen construction of a new kiln in bid to increase clinker production capacity.
The new facility that has cost USD 46 million was necessitated by the rapid growth of the construction industry that led to increase in demand and the need for the company to increase its market share. Even as the cement companies upgraded their facilities and increased the cement output to meet the local demand and have surplus for export, the government still went ahead to suspend the 35 percent duty on imported cement, leading to dumping of subsidized cement from India and Pakistan. This move and situation has left the cement industry in doldrums, as the local companies that have invested heavily in the industry find it difficult to compete with the cheap imported cement. As a consequence, Tanga Cement company has had shelf the second phase of its expansion programme. A Kenyan cement investor who had planned to build a cement factory near Tanga Cement Company never commenced construction of their factory a year on after the ground breaking ceremony presided over by top government leadership. Their equipment lays eerily along the Tanga Highway, perhaps, the most telling effect of the suspended duty.
“The addition of new capacities by Tanga cement has now taken the current capacities of Tanzania cement plants to 3million tons, which is more than enough to meet the current domestic demand of 2 million tons per year” said the Managing Director. Mr Ben Lema, the company’s Factory Manager explained that the massive project has a grinding unit capacity of 80 tons per hour, and has a clinker storage silo that can store 15,000 tons. The new packer can pack at a rate of 120 tons per hour and features a new and more efficient clinker and cement transport system, complete with anew loading bay and additive preparation unit. It has used 8000 cubic metres of concrete, 1,350 tons of steel, 226 mortars and other equipment and 120km of electric cables. While most equipment steel and cables were from china, critical equipment was sourced from well known suppliers Europe. Part re-bars, aggregates and other consumables were locally sourced.
Mr. Lema decried that despite all this investment, the company has had to shut down the factory at least twice in the course of last year as the silos were full. He wonders how a country that is having a one million ton surplus of cement can allow duty free imports of up to 20,000 tons a year.
The EAC partner states had unilaterally removed suspended duty on imported cement in July 2008, after agreeing to a 5 per cent phased approach following the coming into force of the East African community customs union, causing imports of cement to start flooding into the region.
Global cement consumption of cement currently stands at 2.6 billion tons, with china the fastest growing economy in the world consuming some 1,200 million tones of the product annually. India consumes of 188 million tons while Egypt consumes 30 billion tons and South Africa, 17 million tones.
East Africa put together, consumes 5 million tons. Estimates of exports of cement show that in 2006 the total global exports of the product reached 100 million tons with china accounting for 35 per cent. Thailand exported 15 million tons, and Egypt and India tied on 8 million.
The regional cement manufacturers fear that if the suspended duty is not re- instated, imports from countries like china, Egypt and India will find their way into the region and kick them out of the market.
The local cement manufacturers, as indeed all other manufacturers are faced with expensive and unreliable power supply. Power outages, as explained by Mr. Bernard Lema, the company’s Factory Manager, and sometimes numbering 30 per month have a devastating effect on the plant, sometimes costing up to USD 10, 000 per an outage. The factory consumes 12 megawatts of electricity, about 50 percent of the power usage of the whole of Tanga Region, and spends Tz’s 600 million a month in power bills. The company’s operations are stifled by, other than high energy charges, poor infrastructure and logistics.
Mr. Fluehmenn however said that the company is in dialogue with the ministry of industry Trade and marketing to see that the suspected duties on cement are restored as committed earlier so that the current expansion is revived.
Despite the world economic recession, Tanga cement recorded a revenue increase of 29 per cent, while earnings per share rose by 28 per cent, he said. Domestic sales volume grew by 9 percent, while improvements in the operations helped to contain no-fuel costs. However, steep rise in world coal prices posted higher costs on energy.
Tanga Cement Company limited was commissioned in 1980 and built largely from funds donated by the Danish Government. It shares a trade name under its brad name Simba Cement.
