Africa’s richest man prepares to take on Lafarge

25 August 2015

Africa’s richest man strives to dominate its market for cement, the material at the heart of the continent’s infrastructure boom.

All that stands in his way is the world’s biggest cement maker, a flood of low-priced imports, the threat of slowing growth in contracts for dams, ports and roads and a slump in the most-traded emerging-market currencies to a record low.

All these factors are not stopping Aliko Dangote.

“Africa’s future growth is essentially linked to cement,” Dangote, 58, told assembled dignitaries, including Zambian President Edgar Lungu, earlier this month as he opened a new factory on the outskirts of Ndola, Zambia’s third-largest city. The material is “the most basic input into building infrastructure”.

The plant will help bring Dangote Cement’s total production capacity to 43 million tons by the end of this year, within striking distance of the African capacity of market leader LafargeHolcim – which runs its own Zambia factory about 30 kilometers from the plant Dangote was opening.

Dangote Cement, which has expanded capacity five-fold in the last four years, plans to about double potential output, to 80 million tons, Dangote says. The Ndola plant is one of five new factories he’s opening this year across sub-Saharan Africa, including two in the LafargeHolcim strongholds of Cameroon and Zambia.

Africa has become one of the world’s fastest-growing regions for the building material as rapid urbanisation and spending on transport, power and shipping boost demand. Significant projects under construction include Ethiopia’s $4bn hydro-power dam on the Blue Nile River and a $13bn railway that will link the Kenyan port of Mombasa to the Rwandan capital of Kigali via Uganda.

The additional production from Dangote’s new factories is already having an effect on local cement markets. In Senegal, the company says it provides more than 30% of all cement sold in the country, where it opened its first plant in January.

Falling prices

In Zambia, cement prices have fallen about 20%, a result of the company’s push against LafargeHolcim, according to Sipho Phiri, who chairs a company planning to build a $180m hydro power project in the west of the country.

The project will need about 20 000 metric tons of the material so the price drop makes a significant reduction to his capital investment, he said by mobile phone. And none of it will come from Lafarge Zambia.

“They were taking advantage of their monopoly,” said Phiri. “People including myself, as a matter of principle, will only buy Dangote cement. I’m emotional about it.”

 “Africa is a fast-growing region with huge construction needs supported by demographic trends and growing urbanisation,” LafargeHolcim said in an emailed response to questions. The company “is well positioned to serve the continent’s construction needs from its existing strong supply network in cement with facilities in 15 countries” in Africa.

Even so, the two biggest cement producers in Africa aren’t the only ones expanding. Johannesburg-based PPC is building new plants in the Democratic Republic of Congo, Zimbabwe and Ethiopia, and has started production in Rwanda. HeidelbergCement of Germany added 2.9 million tons of capacity in Africa last year, its biggest growth region. Heidelberg predicts that cement demand will expand 50% by 2020 in the sub-Saharan region.

“Capacity is not enough to meet demand in these countries,” Baldeira said. “When we think about the future of the world demand for cement in the next 10 years, Africa will be a big driver.”

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