Government drafts cement industry development strategy
The Ministry of Industry is drafting a national cement industry development strategy that will enable it to assist the fast growth of the industry.
State minister of Industry, Mebrahtu Meles (PhD), told The Reporter that his ministry in collaboration with the Adama Science and Technology University started drafting the national cement industry development strategy last July. Mebrahtu said the cement industry is facing several challenges including high production cost, limited market, inadequate transport service and unavailability of locally produced packaging materials. According to Mebrhatu energy cost accounts to 60 percent of the total expenses of a cement factory.
Most of the cement factories use coal as fuel. Though coal deposits are found in different parts of the country it has not been utilized. Cement factories import coal from South Africa and other countries. Mebratu said the coal import escalates the cost of production. Recurrent power cuts is another headache to the cement industry.
The construction boom that started in 2008 created a huge demand to cement that led to the impartation of cement in large quantity with hard earned foreign currency. This prompted the Ethiopian government to invite local and foreign investors to invest in the cement industry. A number of cement factories were built in short period of time and importation of cement was banned with the exception of especial cement. The government also suspended issuing investment license for cement factory development.
At the 7th annual Africa Cement Trade Summit held April 6-7 at the Sheraton Addis, Mebrhatu said that there are 18 companies engaged in cement production. The installed production capacity has reached 11.2 million tons. This is expected to further increase to 17.15 million tons. The factories are actually producing 5.47 million tons per annum.
Mebrhatu said the average cement production capacity utilization rate in the country is below 50 percent. “This level of capacity utilization is substantially low compared to global average of 60-70 percent or recommended acceptable optimum production capacity utilization rate that range between 80-85 percent.”
Ethiopia historically has low cement per capita consumption as low as 39 kg in 2011 where it reached 62 kg in 2014 where it is still low compared to global average of 500 kg and 765 kg of sub-Saharan Africa average.
The major cement markets are geographically concentrated around Addis Ababa. Mebrhatu said the current profit margin of cement firms in Ethiopia is very low. “The in efficient road transport contributes to the high trade cost for the cement industry.”
The production of cement has surpassed the demand. Mebrhatu stressed the need to stimulate the induced cement market due to high price.
The newly built Dangote Cement factory will soon start channeling its product to the market. The factory built at a cost of 500 million dollars near Muger town, 87 kms west of Addis Ababa, has the capacity to produce 2.5 million tons of cement. The factory recently started trial production of clinker. According to Teshome Lemma, general manager of Dangote Cement Ethiopia, the factory will start production in the second week of May.
Habesha Cement Factory is also expected to start production in 2016. Habesha has an installed cement production capacity of 1.4 million tons. Industry observers fear that there could be surplus production of cement when these companies join the market.
With the view of avoiding market saturation and price war the government the Ministry of Industry stopped issuing license to new cement factories. However, Mebrhatu said this is a temporary measure adding that the ban could be lifted as the demand for cement picks up. According to him, the cement industry development strategy will resolve this and other problems. The strategy is expected to be finalized and endorsed in the coming few months.
Guest of honor at the Africa Cement Trade Summit, Mekuria Haile, minister of Urban Development, Housing and Construction, said that the mega public projects including the construction of sugar factories, railway lines, and hydro power plants created a high demand for cement consumption. “In order to respond to the growing demand of cement, our government has taken major actions in creating conducive environment for cement production by both local and foreign investors. Recently, different national and international business groups have shown interest in investing in Ethiopia-this may witness cement self sufficiency and export possibility too,” Mekuria said. Ethiopia is exporting cement to Somalia, Djibouti and South Sudan in small amount.
According to Mekuria, the country’s annual demand reached seven million tons of cement and the production capability is more than the demand. However, he said the price of cement in the local market is still high. He stressed the need to work on production cost reduction and market stimulation. The construction sector in Ethiopia contributes 7.4 percent to the country’s GDP is expected to have a significant share by the end of the second GTP. The annual growth of the construction sector is expected to continue to grow at a rate of 30 percent in the GTPII.
Albert Corcos, Dangote Cement regional CEO Eastern and South Africa, said that his company wants to consolidate its leadership as a Pan African Cement Group and occupy leading markets in Sub Saharan Africa. Corcos expressed his company ambition to gain more than 60 percent market share in each country of investment – with the highest market quality product.
Dangote Cement built cement factories in 17 countries. The total cement production capacity is 50 million tons. The company will boost the production capacity to 60 million tons in 2017.
According to Corcos, infrastructure, dearth of energy, skilled manpower and inefficient transport are some of the major challenges facing the cement industry in Africa. Dangote Cement took various measures to address the challenges.
Dangote Cement is forced to build its own power generation plant in some countries where it established cement factories. It also operates its own trucks due the unavailability of capable transport companies. “If we want to mobilize 100 trucks at a time there is no such company with that capacity,” he told participants.
Dangote Cement operates a fleet of 7000 trucks in Nigeria. According to Corcos, the company will import 600 trucks for the Ethiopian Cement factory. “Three hundred of them will arrive end of this month and the others will come some other time.”
He said that the company imports cement bags from Saudi Arabia adding that it will consider building its own cement bag manufacturing plant in Ethiopia.
The Africa Cement Trade Summit is organized by a Singaporean company, Center for Management Technology in collaboration with the Ethiopian Ministry of Industry. The meeting is organized in Addis Ababa up on the recommendation of Aliko Dangote. More than 15o participants attended the summit. The delegates visited the newly built Dangote Cement factory. The factory will soon be inaugurated in the presence of senior Ethiopian government officials and Aliko Dangote.
Spur and Panarottis Pizza Pasta to open their doors in Ethiopia
Mega restaurant franchisor, the Spur Corporation is set to debut two of its six franchises in Addis Ababa in the coming months.
“Ethiopia is a dynamic, productive country with one of the highest GDP growth rates in Africa. It holds many opportunities for entrepreneurs like our new partners,” said Pierre van Tonder, CEO of Spur Corporation in a statement.
The SA-based franchisor has signed its first Ethiopian Spur Steak Ranch franchise agreement with Cucina Trading PLC – an Addis Ababa-based company – and it will open the first Spur within the next six months, while Panarottis Pizza Pasta is expected to open within a year.
Van Tonder revealed that this move was part of a bigger plan to expand their 39 restaurants across 12 African countries.
“Spur International plans to have 100 restaurants in Africa outside of South Africa within five years, so it makes sense for us to have a presence in one of Africa’s fastest-growing economies,” he said.
Mulugeta Demissie, managing director of Cucina Trading PLC said he was positive that the two restaurants would be successful.
“We’re secure in our decision to work with Spur International. Their mission to provide outstanding food and excellent service synchronises perfectly with our vision to raise the standards of the hospitality industry in our country and beyond.”
Demissie said they estimated that 60 new jobs would be created – with a prospect of more in the future.
Setting up shop in Ethiopia is one the many ways the Spur Corporation is trying to expand its brand. Earlier this year it acquired a 51% share in RocoMamas, a Gauteng-based hand-made “smash-style” burgers, ribs and wings brand that prepares all orders fresh, on site.
Van Tonder revealed that the corporation would soon be opening another two franchises in Arusha, Tanzania as as well as one in Kenya and in Zambia.
Ethiopia, Rwanda keen to enhance cooperation
Leaders of Ethiopia and Rwanda expressed desire to work together to strengthen economic cooperation and avert challenges they have faced.
After discussing bilateral and regional issues, Ethiopia’s Prime Minister Hailemariam Desalegn and the visiting Rwandan President Paul Kagame gave a joint press conference for members of local and international media.
Prime Minister Hailemariam said that they discussed major areas of bilateral cooperation including sharing best practices to boost economic growth and ways of creating economic integration.
The Premier said agreement is reached between the two parties to take steps forward for more economic integration, saying: ”we decided that there will be energy, electricity interconnection between our countries through the regional pool and that integration will help us to boost to transform our economies in to industrial economy.”
The two countries also agreed to share their best practices in agriculture and rural development that HaileMariam expressed Rwanda has witnessed a major success.
The Premier said that there is a prospect to connect Ethiopia and Rwanda in electricity, he said: “Ethiopia is already under the process of connecting with Kenya from Wolaita Sodo’s station to Nairobi that can lead to Rwanda very easily and of course we have an agreement that there is an office in Addis Ababa regarding the Eastern African Power Pool so with that in plan I think we will easily connect Rwanda in the future. ”
Ethiopia and Rwanda also agreed to coordinate their efforts to restore peace and stability in the East African region, since both contribute troops for various peacekeeping missions in the area.
Rwanda’s President Paul Kagame, who is in Ethiopia for a two-day official visit, on his part said the two parties will work together ‘not only for the benefits of the two countries and peoples, but also in the context of regional integration’.
The President said the countries’ cooperation ‘immensely ‘ contributed for strengthening and building Africa.
Kagame noted that his country is ‘willing’ and ‘happy’ to play its role to transform its relation with Ethiopia and besides creating opportunities, the two countries’ collaboration gives them the capacity to address challenges.
After the discussion, the two countries signed a Memorandum of Understanding (MoU) for a partnership in urban development and housing.
Ethiopia says China’s POLY-GCL to start gas drilling by July
Ethiopia expects Chinese firm POLY-GCL Petroleum Group Holdings Ltd to begin drilling for natural gas in development blocks in the southeast by June or July, the mines minister said.
Foreign firms have acquired licences to explore in more than 40 blocks throughout Ethiopia in the past four years, mostly in the southeast region near Somalia.
The Mines Ministry says the Calub and Hilala fields in the southeast Ogaden Basin have deposits of 4.7 trillion cu feet of gas and 13.6 million barrels of associated liquids. The deposits were discovered in the 1970s but have not yet been exploited.
Mines Minister Tolesa Shagi told Reuters that POLY-GCL Petroleum was carrying out seismic tests in both sites, where it has laid some infrastructure such as a 35-km (20-mile) road.
“They will enter the digging phase around June and July (this year),” he told Reuters. “2016 will be a year when major works such the designing and laying of pipelines that will connect with an LNG (liquefied natural gas) plant in Djibouti for export will also be completed.”
POLY-GCL Petroleum was set up to develop oil and gas in Ethiopia but aims to expand to other countries. It signed a deal with the Mines Ministry in late 2013 to develop both fields. It also has eight exploration blocks.
POLY-GCL Petroleum said on its website that in 2015 it planned to drill five wells – two appraisal wells to establish the extent of reservoirs and three wildcat wells to look for more hydrocarbons. It also said it planned seismic work.
It did not give further details on timing. Company officials could not immediately be reached to comment.
The project involves developing the fields, building a pipeline from landlocked Ethiopia to the coast of neighbour Djibouti, where it will build an LNG plant and export terminal, the company website said.
POLY-GCL Petroleum said the cost was estimated at $4 billion with first LNG production expected by mid-to-late 2018. Phase one aims to produce 3 million tonnes a LNG a year, eventually rising to 10 million tonnes.
POLY-GCL Petroleum is a joint venture of state-owned China POLY Group Corporation [CNPGC.UL] and Hong Kong-based Golden Concord Group.
African’s eastern seaboard could soon become a major global LNG producer, with other projects planned based on big gas finds made in Tanzania and Mozambique.
Metro rail gets off the ground
Financing and regulation have held back mass transit systems in Africa.
Since the start of the year, commuters trapped in Addis Ababa’s traffic gridlock have seen passenger trains humming along raised lines above the city – a glimpse of a future outside of the endless traffic jams.
Construction of the city’s $475m metro began in 2012. The testing phase is now under way, and the passenger launch is set for May. Its two lines run for a total of 32km, with underground and overground sections, 39 stations, and two operators – the Ethiopian Railways Corporation and Shenzhen Metro. It is expected to carry 60,000 passengers a day, and even that may not be enough to keep up with demand.
The metro is the first of its kind in sub-Saharan Africa outside of South Africa – although others are still in the planning stage. Nigeria’s commercial capital of Lagos intends to build 57km of lines; in Kenya, the government’s Vision 2030 includes plans to build an integrated 167km road and rail transport system linking the capital Nairobi’s 3.4m people with neighbouring towns.
Light rail is on the agenda in Ghana too, but the long-planned $1.5bn monorail project for Accra is yet to approach fruition.
Dr Nigel Harris, managing director of leading rail experts the Railway Consultancy, cautions that metro rail projects are not always economically viable and need to meet a tipping point before the investment becomes worthwhile. Harris defines this as 1m people with adequate incomes. “Unless you have enough people with money to travel, you don’t make a lot of money,” he says.
But with 2.5m people needing transport in Addis Ababa daily, and the relatively low cost of electricity, Ethiopia believes its investment is safe.
“Ethiopia has been able to mobilise economically viable financing from domestic and external sources. The rate of return in the project clearly shows the project will be technically and economically viable,” a spokesperson at the Ethiopian Embassy in London says.
The challenges for rail projects, Harris says, are the need for a conducive regulatory environment, and the capital needed to keep them running. “The main thing with railways is you need to maintain them, and that needs money.”
Investment in rail infrastructure is, however, a tool to achieve economic growth in the long-term, Harris says. “You’re not going to get your money back in less than 25 years if you’re lucky. But there are great social benefits, and that is what Ethiopia has realised.”
Gabriella Mulligan/Alexa Dalby
Ethiopia Signs Credit Facility Agreement with French Development Agency (AFD)
A Credit facility agreement amounting to 50 million Euros (approximately 1.07 billion birr) were signed, today, 16 April 2015, between the Federal Democratic Republic of Ethiopia and the French Development Agency at a ceremony held at the Ministry of Finance and Economic Development (MOFED).
The credit facility agreement was signed to provide 50 million Euros to finance the implementation of a project aiming at financial and technical support for Bus Rapid Transit (BRT) B2 pilot corridor, which is one component of the Addis Ababa City Administration (AACA) long term public transportation network combining in a short term Light rail way transit (LRT), Bus Rapid Transit (BRT), regular bus lines and, in a long term, subway.
During the signing ceremony H.E Ato Ahemed Shide said “the project helps to build and operate the first pilot lane of BRT on a segregated corridor running from Wingate to Gofa Gebriel and mixed traffic from Gofa Gebreil to Jemo, within the framework it’s multimodal and integrated transportation system”.
The project will be implemented by Addis Ababa city administration, final beneficiary of the facility, represented by the Addis Ababa road and Transport Bureau (AARTB) acting as implementing agency.
French through the French Agency for Development worked with Addis Ababa City Government in terms of solid waste management (SWM) which will expand to relocation and modernization project of Addis Ababa Abattoirs Enterprise.
The agreement was signed by H.E Ato Ahemed Shide, State Minister of MOFED, and Mr. Christian Yoka, AFD Regional Manager on behalf of Federal Democratic Republic of Ethiopia and on behalf of the French Development Agency respectively.