[Original] Ethiopia: Cement Industry at Crossroads

   The cement industry in Ethiopia is facing severe challenges that are affecting the productivity and growth of domestic cement plants.

   At the first East Africa Cement, Concrete and Energy Summit held in the African Union Conference Hall from March 17 to 19, industry enterprises believed that the domestic cement industry was at a crossroads.

   Gemechu Waktola, managing director of i-Capital (Africa) Research Institute, said that although domestic cement production capacity has generally maintained growth, cement consumption has not increased accordingly. Gemechu emphasized that the construction boom from 2004 to 2012 led to a large increase in cement demand and a shortage of domestic cement, followed by the influx of foreign-funded enterprises and the expansion of domestic enterprises.

   At present, there are more than 20 cement plants in Ethiopia, with a total capacity of nearly 15 million tons of installed cement, including 2.5 million tons of capacity of Dangote Cement, a new giant. Muger Cement, Messebo, Dangote, Derba and National Cement are the leading players in the industry. Habesha Cement's 1.4 million tonnes of cement will also hit the market in 2017.

   Although the annual production capacity reaches 15 million tons, the annual consumption of cement is only 6 million tons, and the per capita consumption of cement is only 62 kg, which is very low compared with the per capita consumption of 165 kg in sub-Saharan Africa. The capacity utilization rate of cement plants in Ethiopia is only 50%.

   Gemechu believes that the domestic cement market is saturated and that the government made a miscalculation at the beginning of the Growth and Transformation Plan (GTP), predicting that cement consumption in the first phase of the GTP would reach 27 million tons in 2015, with a per capita consumption of 300 kg. However, in fact, by the end of 2015, the consumption of cement was only 5.47 million tons.

   Domestic cement producers are trying to export cement to South Sudan, Djibouti and Kenya, however, the market is limited and the problem of market saturation cannot be solved. There is no competitive advantage in transporting cement by truck 300 kilometers away.

   Demand has fallen by 15-16%, says Haile Assegide, CEO of the Derba MIDROC Cement and president of the Ethiopian Cement Association. He said that the current domestic demand is between 8 and 9 million tons, and the shortage of skilled labor is another problem in the industry.

   The Ministry of Industry and Adama University of Science and Technology drafted the National Cement Development Strategy 2015-2025, which has not yet been approved and implemented. Gemechu said that solving the problems faced by the industry requires the joint efforts of the government and all stakeholders. However, there is an urgent need for action, and a price war is a possible option. Gemechu stressed that large enterprises will acquire small enterprises, and small factories will be phased out.