Mega projects and real estate boom attract cement firms

Mega projects and real estate boom attract cement firms

Scale model of a skyscraper Construction. Kenya’s cement consumption has more than doubled over the last decade, driven by mega infrastructure projects as well as individual homes.

In 2010, local cement consumption stood at 3.1 million tonnes.

This has steadily risen to 7.3 million tonnes by last year, and this year, growth margins seen over the last decade are still expected, if not higher. Kenya’s cement consumption for the first five months (January-May) stood at 3.35 million tonnes, a 20 per cent growth compared to the 2.64 million tonnes consumed over the first five months last year.

The demand has increased the production capacity as local cement companies boost their production capabilities to tap into the growing demand.

New players are also keen to take advantage of the seeming boom in the industry with plans to set up new plants.

But this has also led to worries it could result in oversupply – leading to reduced retail prices.

This is especially when the mega infrastructure projects start to dry up, with the government slowing down on new projects due to concerns over mounting debts.

This is even as alternative modes of financing such projects – including the public-private partnerships (PPP) route – fail to yield expected results, with only a handful of projects taking off so far under the PPP model.

There are already telltale signs. The East Africa Portland Cement Company (EAPCC), while responding to shareholder questions during its annual general meeting as to what led to its poor performance over the financial year to June 2020, the firm partly blamed “downward pressure on retail prices due to supply glut”.

This could be more evident in the coming years, with old players looking to up their game by rejuvenating their old plants and tweaking their production processes to be more efficient and competitive even as new entrants look at giving them a run for their money through their investments.

Seddiq Hassani, the Bamburi Cement Group managing director expects the 10-year growth to be sustained.He noted that while there has been growth in the volumes of cement going into big infrastructure projects, Kenyans remain the industry’s key customer. Home builders This year, Bamburi saw an increase in volumes going to the infrastructure projects, which accounted for nearly 30 per cent of the cement the firm sold — occasioned by the many projects being undertaken in Kenya.“Today, infrastructure projects represent about 28 per cent of our volumes. Last year, same […]

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