Africa, now the fastest growing market for cement in the world, seems to be undergoing radical change in how its buildings are constructed—whether its self-build housing or large-scale infrastructure projects, cement is increasingly the key construction material. This change has occurred across the world, where cement use has increased at a greater rate (by a factor 25 from 1950 to 2010) than any other material. China has been the predominant driver of this growth—it increased its production of cement from 800 million tonnes in 2009 to 2.9 billion tonnes in 2012. Though only 75% of this is used and the Chinese government has started to curb production, China’s cement use is truly staggering: in three years, between 2011 and 2013, it used 140% of the cement that United States used over the one hundred years of the 20th Century, between 1900 and 1999. In Africa, like in China, the increased use of cement is the result of rapid urbanisation, which requires new infrastructure and new housing.
And while part of this increased demand for cement has been met by imports (which increased by, on average, 14% a year between 2000 and 2013), it has also resulted in significant investment in new cement manufacturing plants across the continent. Not only is the number of these new plants—that are being planned, are under construction or have recently started operations—illustrative of the demand for cement, so is their capacity. Where before a cement plant would have an annual output of hundreds of thousands of metric tonnes of cement, many of these new plants have a capacity in the millions of tonnes.
The most ambitious investor on the continent, at this moment, may be Dangote Cement—the Nigerian cement manufacturer’s annual capacity increased from 21 million tonnes to 34 million tonnes during 2014, and will be at over 50 million tonnes once its planned plants are completed. Its capacity in Nigeria will increase to 23.25 (million metric tonnes per annum) mmtpa, and it is constructing plants in 13 countries across the continent. This US$2.5 billion investment includes a plant in Senegal, with an annual capacity of 3.5 mmtpa; a US$300 million, 3 mmpta plant in Tanzania; a US$600 million, 2.5 mmtpa plant in Ethiopia; and a US$300 million, 1.5 mmtpa in Zambia. A new 3 mmtpa plant is already in operation in South Africa, while plants, each with a 1.5 mmtpa capacity, are under construction in Cameroon, Cote d’Ivoire, Gabon, Ghana, and the Republic of Congo.
Dangote is not the only pan-African cement manufacturer—Heidelberg Cement, based in Germany, has subsidiaries in 8 African countries, while both Lafarge and Holcim, two of the world’s largest cement manufacturers (and which are in the process of a merger) have a presence across the continent. Holcim’s presence is more limited in contrast to Lafarge’s, which recently commissioned plants that will increase its production by 5.5 mmtpa (Lafarge and its subsidiaries already has a capacity of 40 mmtpa).
Lafarge’s strategy has not been limited solely to the manufacturing of cement, it has also made efforts to increase demand for its products through agreements with developers (for example, its memorandum of understanding with Shelter Afrique for a development in Abuja, Nigeria), partnering with housing microfinance institutions, and designing and advertising products specifically for small-scale construction. The future strategy of LafargeHolcim, the company that will be the result of the merger, could impact the market in Africa, as it will involve a consolidation of divergent strategies and different degrees of exposure to African markets. Beyond this, cement manufactures are under constant threat from cheap imports—in South Africa, cement imports from Pakistan have recently been subject to a special import duties because of dumping, while manufacturers in Tanzania have struggled to compete with imports from Pakistan and China.
But an increase in supply may not adequately decrease the price of cement, as there are factors that may limit this impact. First, a cement plant requires electricity on a scale and with a consistency that is often not readily available in many African countries. Constrained supply of electricity reduces outputs, resulting in plants operating at below capacity. There are efforts to address the issue for particular plants, such as Dangote Cement’s plans to construct a power station to supply its new plant in Tanzania with electricity. The second limiting factor is the poor transport infrastructure across the continent: the cost of transporting cement from manufacturing plants to construction sites, passing through warehouses and through artisans’ workshops along the way, dramatically limits the affordability of cement. This can be seen by the variation in cement prices, notably higher in land-locked countries.
Lower cement prices should result in more affordable and better quality housing. Better quality blocks, made with more cement and less sand, will be used, while developers will be less likely to compromise on the quality of construction. The increase in the production of cement is an important step in providing affordable housing in Africa, and increasing the provision of infrastructure. It will be interesting to see the fortune Dangote Cement, LafargeHolcim, and many other producers, as success and failure will be representative of development across the continent.