Saturday May 26 2018
Dangote Cement, which three years ago took East Africa by storm, is facing a hard time in the region, especially after the recent killing of three of its employees in Ethiopia. The cement maker is also struggling with unfavourable policy changes in Tanzania.
Dangote’s Ethiopia country manager Deep Kamara and two of his aides were shot dead in the restive Oromia region, where the cement firm has had tense relations with the local community.
At some point, things were so bad the firm was forced to suspend operations in August 2017 for a month.
Ethiopian government agencies said Mr Kamara was returning to the capital from the factory when he was ambushed by unidentified gunmen, who killed him, his driver and personal assistant.
Carl Franklin, a spokesperson for the Dangote Group, was not immediately available for comment over the killings.
The tragedy came barely two weeks after the cement maker announced a 4.4 per cent drop in its pan-African operations (outside Nigeria), largely attributed to disruptions by the civil unrest in Ethiopia and a dip in sales in Tanzania.
The firm sold 2.2 tonnes of cement in the first three months of this year, lower than the 2.3 tonnes sold in the same period last year.
“In Ethiopia, sales at our 2.5Mta factory in Mugher, Ethiopia, fell by 16.7 per cent in the three months of 2018 as a result of continuing disruption due to civil unrest in the Oromia region, as well as more local challenges we are experiencing with the communities around our mining operations in Mugher. As a result, we sold approximately 443Kt of cement in the quarter, down from 532Kt over a similar period in 2017 with a market share of 22 per cent, meaning we remain the market leader in Ethiopia,” the firm said in its latest financial results update.
In response to the disruption, which cost it 10 days of shipments from the plant, Dangote Cement said it had increased initiatives to improve relations with the local community.
“With the appointment of a new prime minister, we have seen a resolution of regional political issues and roads are now clear, enabling us to deliver to all markets without hindrances. In addition, we have reached an agreement with local communities on royalties for raw materials, with the intention that they be used to support local development initiatives. The additional cost of these will be offset by increased pricing, which we introduced during the quarter. The ex-factory price across the quarter was $67 per tonne,” the firm said.
Mr Kamara’s killing might be an indication that all is not well with Dangote Cement’s operations in Ethiopia.
The EastAfrican understands that the cement firm’s Ethiopian drivers have been on strike for the past one month, which prompted Mr Kamara to head to the factory to try to find a solution, before he was killed.
It is understood that the local workers have for a long time had labour-related issues with the employment agencies hired by the cement manufacturer and this latest industrial action by the drivers was just one of them.
In 2016, protesters attacked and vandalised the factory and several vehicles and machinery.
Last year, the firm threatened to shut its operations if the Oromia authorities did not reverse an order to cement makers to cede control of some parts of their businesses to local youths. This saw the national government intervene and the matter is still under deliberation.
In Tanzania, Dangote is now banking on the country’s large infrastructure projects that are driving construction activity, including the Dar es Salaam- Morogoro railway, major road and bridge projects and commercial housing.
In the first quarter of this year, the cement maker’s 3.0Mta factory at Mtwara sold 123Kt of cement, which was 46 per cent lower than sales for the first quarter of 2017.
“The fall in sales was as a result of plant maintenance and shutdowns pending the commissioning of gas turbines, to avoid unnecessary losses at the plant, which stopped production for much of February and March. The factory remained reliant on diesel gensets for electrical power, which resulted in losses that weighed on pan-African margins,” the firm said in its latest financial update.
The installation of gas turbines, which were to start operation in Mtwara in March, was again delayed and are now expected to begin to operate in late May or early June, meaning that the firm’s second quarter results could be lower than predicted owing to the higher operation costs of diesel powered turbines.