Dangote Cement is locked in a dispute with the government of Tanzania – its most profitable market in the first half of this year – over the company’s failure to fulfil a regulatory obligation.
The Nigerian-based cement maker last week was accused of not filing its operations report with the Tanzania Investment Center (TIC) according to government regulations. From September 30, the company was given a seven-day ultimatum to tender the document but reports suggest it has failed to do so.
Moreover, Dangote Cement has not submitted its operation reports for the past three years, Angellah Kairuki, the Minister of State in the Prime Minister’s Office in charge of Investment said.
In its defense, the firm’s management was reported to have said they were preparing the report but failed to provide an explanation as to why the company had neglected the mandatory requirement initially.
It is through the report that TIC and the government would get to know of the Dangote Cement’s project history, plans for expansion, taxes paid, profits, challenges, and recommendations, explained Kairuki.
During a recent inspection tour of industries and a meeting with investors, the government official asked Dangote to file the report as soon as possible and henceforth every six months.
The dispute with Tanzania’s government comes barely five years after Dangote Cement celebrated expansion into the eastern African nation. While the company has established itself as a market leader, there have been frequent clashes with authorities.
Dangote had previously experienced issues with President John Magufuli’s administration over tax on diesel imports to run its plant and a ban on coal import. At some point last year, the firm suspended its operations, citing technical problems and high production costs.
The cost factor was due to Dar’s decision to ban the importation of coal from South Africa resulting in the high cost of fuel for its diesel generators which the plant ran on.
But in September last year, Dangote Cement started running its plant on gas instead of coal, a significant turnaround in saving costs and uninterrupted production. The company posted a 172 percent rise in cement sales, from 200,000 tonnes in the first half of 2018 to 543,000 tonnes in the same period this year.
With a rise in cement demand, driven by the government’s investments in infrastructural projects and increased construction activity, Dangote tripled its market share in Tanzania to 22 percent from seven percent last year.
Going forward, experts suggest it is in Dangote’s interest to file appropriate reports with the government in order to ensure smooth relations in the long-term. This is especially significant considering the company’s improvement in the first half of 2019 was only in Tanzania – it reported slow performance in Nigeria and other key African markets like Ethiopia and South Africa.