Congo Cement Factory to Boost National Production Four-Fold

KINSHASA (Capital Markets in Africa) – Democratic Republic of Congo Prime Minister Matata Ponyo Mapon said his government will protect local industry as Lucky Cement Ltd., Pakistan’s biggest producer of the building material, and Groupe Rawji prepare to open a new plant in the country this month that will boost production four-fold in the central African nation.

The $270 million project, known as CIMKO, is owned jointly by Lucky and Groupe Rawji, a closely held Congolese company, and has been financed by lenders including the African Development Bank, the International Finance Corporation, Denmark’s Export Credit Agency EKF and by Habib Bank Ltd. The factory, which will open this month 240 kilometers (150 miles) west of the capital, Kinshasa, has the capacity to produce 1.2 million metric tons of cement a year when it reaches full production.

“We will take care of everything that can hinder your production, unfair competition, fraudulent imports, we will take care of that,” Matata told CIMKO executives last week. “We are conscious of the support that the government must bring,” he said at a Sept. 27 meeting that was also attended by the ministers of finance and economy.

Falling Output
Congo produced 398,749 tons in 2015, according to the central bank and only 114,604 tons in the first half of 2016, 41 percent less than the same period the year before. CIMKO estimates that current cement consumption in Congo is about 1.5 million tons a year, with the rest imported, but is betting that the market should be much bigger.

“Normally a country of this size with a growing economy could be consuming as much as 40 million tons per annum,” CIMKO Managing Director Riadh Ben Khalifa said in an interview at the plant. Congo consumes less than 15 kilograms (33 pounds) of cement per person annually, Khalifa said, below the global average of more than 300 kilograms.

PPC Ltd., South Africa’s biggest cement maker, is also preparing to open a 1 million-ton factory in the same area as Lucky Cement. Combined, the two facilities can increase Congo’s current output by more than seven times.

When Lucky and Groupe Rawji began construction in 2014, Congo’s economy grew 9.5 percent, according the central bank, the third-fastest growing economy in the world that year, according to the International Monetary Fund. The collapse in prices for copper, oil and other key exports has since led to a slowdown, with the government in August slashing its growth forecast for 2016 to 4.3 percent.

Lower Prices
The slowdown will have an impact on cement-consumption growth, but the partners are not overly concerned, Khalifa said. Greater domestic production can lower cement prices, currently among the highest in the world, and drive increased demand, according to CIMKO.

“We still do not know the true size of the market because high prices and a lack of production have held back consumption,” he said. In Kinshasa, the cost of a 50-kilogram (110-pound) bag of cement has risen as high as $15 in the past three months.

CIMKO hopes that infrastructure projects, such as the long-delayed $14 billion Inga 3 hydropower plant, will begin next year as scheduled despite political uncertainty over delayed elections in the central African nation. “If the Inga project starts, we will have   practically three years where our full production is consumed by that project,” Khalifa said.

Protecting Locals
CIMKO and PPC are also calling on the government to protect local output by continuing to block or regulate cement imports.

The Economy Ministry in July suspended the importation of cement, iron rebar and sugar for three months in a move to stop cheap imports from smothering local production. The ban has seen cement prices rocket, particularly in copper rich Katanga province where mining projects depend almost entirely on imported cement.

Exemptions granted by the Ministry of Economy have allowed some imports to re-start and the price to stabilize, but in response to CIMKO and PPC Economy Minister Modeste Bahati Lukwebo Sept. 29 called on the government to continue with the strict regulation of cement imports to support the factories once on-line. These measures will “allow local operators to move their product” he said in a letter to the prime minister and the finance minister.

Groupe Rawji began operations in Congo in 1910, according to its website. Its businesses include trading, manufacturing and Congo’s largest bank by assets, Rawbank.

Source: Bloomberg Business News