Kenya-based National Cement is set to invest Sh18.5 billion ($199 million) in a new factory in Uganda. This will be its first foray into Uganda and more importantly its first plant outside Kenya.
The plant will be operational by the end of next year and will hold an annual capacity of one million tonnes.
National Cement’s strategic move might have been motivated by news that Dangote is coming to town. The billionaire cement manufacturer is set to begin construction of a plant in Kitui, the largest urban centre in National Cement’s home country Kenya. Dangote is poised to swiftly displace local competition with a mammoth three million tonnes of yearly production. Its upcoming factory in Tanzania will have a similar output.
Other top-tier competitors are also moving into East Africa. Indian conglomerate Cemtech and ARM Cement are also mulling plans to set up new plants in Pokot and Kitui areas respectively. This signals a heightened competition for National Cement as the region’s cement industry is expected to play host to more price wars and oversupply. The Standard Investment Bank (SIB) has said in a research note that “cement companies will have to continue absorbing increasing production costs with forecast average excess capacity expected to remain above 20 percent through to 2016.”
National Cement, founded in 2008, is one of the companies riding on relatively low pricing to gain market share, a weapon it expects to utilize in fending off competition and cementing its place among the leading makers in Uganda.
National Cement’s entry into Uganda will put it in direct competition with Lafarge’s Hima Cement and Tororo Cement, the leading cement producers in the country with a combined capacity of 3.6 million tonnes per annum. It also stands further competition from Egypt, Pakistan and Kenya where Uganda currently imports extra cement.
By Peter Oyagbile