Cementing Investors' Future Via Pan-African Drive: Dangote

One of the many theories of international trade states that different countries benefit from international trade because it increases the market for different products.  The theory also adds  that international trade will improve the division of labour, and therefore increase the productivity in each country. Critics of this theory have claimed that it is hurtful to the economic development of lesser developed countries, since these countries normally export raw materials and import already manufactured products. According to them,  the price of raw materials is lower than that of already manufactured products.

Some experts believe that this is the cause of the uneven distribution of international trade. They believe that a specialisation in international trade involves a fundamental change in how a country utilizes its resources, and is therefore not easily reversible. Specialisation, they added, give them a number of advantages, especially in the development of new technology to boost the production.

However, some  argue that Africa has lost out because of the new way big companies are organised and the way trade is carried out. They said African companies lack  competitive advantages.

“Because of this it is important that African companies renew themselves to adapt to the new way international companies are organized, and thus benefit the most from international trade. Today, Africa as a continent faces a lot of challenges, the biggest one being poverty.

“How to solve this problem is therefore an important question, and Africa has to ask itself if it best can be solved by taking a larger part in globalisation, or by isolating itself from globalisation. The best way to battle poverty is through economic growth and this is one of the reasons why many believe that Africa should take a greater part in the international economy, “said Onye Onwuka of Huntingfield Capital.

One of the disadvantages of globalisation, he added, is that developed countries can stifle development of undeveloped and under-developed countries.
“Also, local companies face much greater competition for financing and products. This can put smaller companies, at a disadvantage as they do not have resources to compete at global scale," he added.

Meanwhile, one do not need to look very far to know that the submissions made above reflects  the true  situation many Nigerian companies have faced over the years. Despite the odds, Dangote Cement Group performed well to become a leading force on the Africa continental.

Pan-African Drive

Established in May 1981 as a trading business with an initial focus on cement, the group diversified over time into a conglomerate trading cement, sugar, flour, salt and fish. By the early 1990s the Group has grown into one of the largest trading conglomerates operating in the country.

In 1999, following the transition to civilian rule and after an inspirational visit to Brazil to study the emerging manufacturing sector, the company made a strategic decision to transit from a trading based business into a fully-fledged manufacturing operation. In a country where imports constitute the vast majority of consumed goods, a clear gap existed for a manufacturing operation that could meet the 'basic needs' of a vast and fast growing population.

The group embarked on an ambitious construction programme, initially focused on the construction of flour mills, a sugar refinery and a pasta factory. In 2000, the group acquired  Benue Cement Company Plc from the Nigerian government. In 2003, it inaugurated  the Obajana Cement plant, which is the largest cement plants in sub-Saharan Africa.The group is now one of the largest manufacturing conglomerates in sub-Saharan Africa and is pursuing further backward integration alongside an expansion programme in existing and new sectors.

Cement production in Cameroon
Last week, the management of Dangote Cement Plc announced that its planned consolidation of the African expansion drive remained on course with the commencement of production of its $150 million Cameroon plant in Douala.
The company had listed six plants across five African countries for completion by the end of 2015 which would add 13.5 million metric tonnes of cement/annum to the existing capacity upon completion.

The company said the commencement of production in the Cameroonian commercial city came in the wake of the inauguration of another 1.5 million tonnes capacity per annum Senegal plant in Pout in January.

The plants, according to the President and Chief Executive, Dangote Group, Aliko Dangote, will add about 13.5 million metric tonnes of cement per annum to the existing capacity upon completion. The plants are located in Zambia, with 1.5mmtpa capacity; Tanzania, 1.5mmtpa; South Africa, 3mmtpa; Republic of Congo, 1.5mmtpa; Gabon, 1.5mmtpa; and Senegal, 1.5mmtpa

Back home in Nigeria, Dangote Cement ramp up capacity, adding third and fourth production lines to the existing 6mmtpa in Ibese, Ogun State, to bring the total capacity to 12mmtpa, and another 3mmtpa line is currently being added to the Obajana Cement Plant in Kogi State.

Dangote told a delegation from Organised Private Sector, who visited him  in Lagos, that the 1.5mmtpa plant in Cameroon commenced initial production at one million tonnes per annum before it would be stepped up to the maximum capacity level.

He stated that the Douala plant would revolutionise the cement industry in Cameroon and help stimulate the Western African economy as Dangote Cement would be churning out its 42.5 quality grade of cement at a very competitive price.

Dangote explained that the plant remained the most modern in Cameroon because of the latest technologies used in its construction from Germany, United States and France by the renowned plant engineering firm, Sinoma.

He stated that the company started by importing clinker and that production was being carried out in the most environmental friendly level, pointing out that the dust emission by the plant was lower than the 50mm international standard.
He promised that Dangote Cement as a law abiding organisation would play by the rules of the land and that it would replicate its robust corporate social services in the host community.

Duala Cement plant

Speaking to journalists, General Manager and Head  of Cameroonian factory, Abdulahi Baba, explained that the three manufacturers of cement in the country are about surpassing local consumption demands and that Dangote management are already looking towards export prospects to neighbouring countries to Cameroon.

Dangote Cement was invited into Cameroun in 2008 by the country's government because of the shortage of the product within Cameroun. However, construction did not start until 2012 because of site conditions. Eventually it got its current site and comment construction in 2012. On 28 of January this year, the first ton of cement was produced. The plant with installed capacity of 1.5M MT produces the 4.2R grade cement. The grade is top notch, one of the best available in the market.

According to Baba, Cameroon with a consumption growth of 8 per cent, and with a local production of 2.9m MTPA, the Dangote management was looking at export potentials in Chad, Central African Republic, Garbon, Equitorial Guinea and Togo even as the Company considers future expansion.

He explained that the plant has one of the most recent facilities of ensuring that there are no dust emissions during production.

The GM  stated that the company has put strategies in place to achieve 30 per cent market share, noting that there was also plans of achieving 30 per cent export of total production.

“We use the latest technology in dust recovery system, it is called inject pulse filter system. This helps us to ensure zero pollution unlike what was on ground before we came. The technology helps to ensure that all areas that a dust prone are immediately captured.  The capacity on the factory is 1.5 million MTPA of cement per year, “he explained.

On the size of the market it controls, he said the Cameroonian  market consumes about  three million MT a year and it currently controls 30 per cent of that, adding that it plans to move up higher in its second year of operation.

On the company’s experience in Cameroun, he said, “I think Cameroun is a wonderful country-both the people and the government. The initial problem we had, which is understandable, was the cry of pollution  from existing cement companies. "This factory coming right at the port inside the town attracted such fears and agitation. Since we started production they have seen things for themselves and they are now on our side," he said.

On the level of sales or demand for cement in the country, he said sales had  been on the high side since Dangote Cement ventured into Cameroun.

“The people of Cameroun are very happy with our coming to their market because they now have a choice in terms of quality, pricing and availability," he said. 

Competition and Cement Consumption

Despite this there is competition in the market and one of its fierce competitors is Lafarge Africa. The company has a factory with installed capacity of 1.5M MT but has successfully produced 1.2M.  There is also the government owned CIMAP with installed capacity of 500,000MT.

Analysis of the level of consumption of cement in Cameroun showed that the existing three companies still cannot meet the demand in the country. The capacity of the three companies is about 3M MT while the total consumption is 2.95M MT a year.  In addition to the local consumption in Cameroun, countries around it largely depend on Cameroun for Cement.

For instance, Niger Republic, Central African Republic, Equatorial Guinea, Congo and Gabon and other bordering countries depend largely on Cement supplies from Cameroun.

“If you take into consideration that there has been an annual growth of  eight per cent in cement consumption, you will know that the consumption this year and next will move to 3.2M MT and above. It will continue to grow at that rate,"he said.

He said the coming of Dangote Cement had changed the equation of cement production, demand and supply in Cameroun.

“You can imagine the excitement of the people with the entrance of Dangote Cement into their market. We have given them a wider choice in terms of pricing and continue availability and whatever you can think of," he enthused.

Profitability Opportunity

Another major point for its continuous profitability and existence is the decision of the Cameroonian government to ban the importation of cement into the country.

This, analysts said, would encourage more investment in local cement production in Cameroun; a development that will boost the much needed job creation for the country’s teaming unemployed youths.

“We are monitoring the ban on cement importation cautiously because we understand some backlogs are still been brought in. But fresh orders have been banned," Baba stated.

On measures put in place to check counterfeits, he said, “We have a very structured distributorship system here. Once your rout to the customer is effectively defined and properly monitored, you can always counter the effect of adulteration of products. Our rout to the market is very clear; we sell to the distributors who has their own retail outlets where they sell. We also sell through our distributors to the retailers.  We are monitoring the chain effectively 100 per cent.”

On affordability and availability, he said, “Our plant is very robust, our raw material supply is very consistent, we have a dedicated jetty so that even if there is congestion at the port we are not held up in any way. The jetty is being constructed by Dangote Cement, but we are in discussion with the Cameroonian government so that whatever cost we incur we be refunded to us.

“Our supply line is very well defined and controlled so that the raw materials continue to flow in. The part we source locally we are involved in the mining directly, we don’t depend of third parties who can disappoint us any time.  With that measure we ensure that the raw materials are coming in steadily, the plant is available and can continue to produce. In that manner we have ensured that product availability we be very continuous.”

As a result, he assured stakeholders that the future of the company  is very bright, adding that the company’s shareholders’ fortune can only get better.

“The future of this company is very bright in the sense that our local raw material (Bozolane) is in abundance. Untill now, they were using  it  for road construction and other things not very important. But we are adding value to it now and because this is available we see a very bright future for this company in Cameroun,“he stated.

On the impact the company is having on the economy of Cameroun, he said, “This is an investment of about $150 million (N29.7 billion), it is going to provide direct and indirect employment to thousands to Cameroonians. It will also provide the base for development of the country.

“The area we are mining from is an area of secondary economic activity, the factory it self is also an area of secondary economic activity. Same with the other deport that we ran across Cameroun. The benefit to Cameroun is enormous, we have a total workforce of 290, out of this, only 13 are expatriates others are Cameroonians.  For investors, the return is going to be bright because the market is their, the raw material is there and the people will continue to patronise our product because of its quality and price. So investors are guaranteed of bountiful returns.”

Demand for Cement

Baba stated that the demand for cement is growing every day because of the infrastructural developmental efforts of the government.

“We will take the advantage of the ban on cement importation here in Cameroon. We have structured distributorship system in place. Our route to market is very clear and defined. We are building a jetty so that we are not held down but have smooth distribution during congestion at the ports.

"We are set to achieve stability of operations in 2015 Q1, pursue aggressive market  penetration and consolidation through appropriate above the line and below the line activities. 170 distributors have been selected after the interview process. 85 distributors will start, while the number will gradually increase with increasing production

“Mines at Tombel (a mine site in Duala) have been opened up and it is under exploitation. The Mines at Batoke would soon become operational. Exploration licence for Foumban deposit has also been secured. EIA and other activities for securing mining lease are being processed. About 5,000 MT of pozzolana is stockpiled at the living area,"  he stated.

Baba noted that the company's ex-factory price is the cheapest in Cameroun when compared to other products in the  market, stressing that Dangote Cement is cheaper than 32.5 grade that is sold in the open market.

A distributor to the company and Managing Director of ETS Limited, Fonoggi Serge, noted that the product is of a very high quality but sold at a very cheap rate,.

“Consumers and other dealers are already making demand for the commodity. I sell 20 tons daily and the acceptability of the product is rapidly increasing and it goes for between 4,000 – 4,500 CFA," he said.

A block maker, Kamdoum Rodrigue,certified that the product is very good, stressing that it take a shorter period to dry.

“Before now, we used to stay for one week waiting for the blocks to dry, but with this new product, we only stay for two to three days and our blocks are ready for supply. Now we meet our customers demand earlier than it used to be.” Rodrigue stated.