Matthew Hill Lusaka
LAFARGE Zambia will begin work on a e200 million (R2.5 billion) cement plant this year even as Africa’s richest man, Aliko Dangote, starts up his own factory in the country and economic growth slows.
Construction on the expansion in Lusaka, the capital, would start in the second half of the year and be completed in 2018, Emmanuel Rigaux, chief executive of the Lafarge unit, said last week.
The work will double Lafarge’s plant in the city, adding 1 million tons of capacity.
Dangote Cement was due to start production at its $400m (R4.7bn) Zambia facility last month, challenging Lafarge’s dominance for the first time since it was founded in 1949 to supply cement for Kariba, at the time the world’s biggest dam. The Dangote plant will produce 1.5 million tons a year, more than Lafarge’s two existing factories combined.
Even so, the expansions would not cause a glut, mainly because of demand from the neighbouring Democratic Republic of Congo, Rigaux said. “The growth there is massive, in fact it’s even higher than in Zambia.”
Dangote planned to start work on a second plant, the same size as its existing facility in Ndola in Copperbelt province, the state-owned Zambia Daily Mail reported last month. A spokesman for Lagos-based Dangote, Africa’s largest producer of the building material by sales, did not respond to an e-mail seeking comment.
Lafarge Zambia, 75 percent-owned by its Paris-based parent, produced 1.2 million tons of cement in the country last year. Shares in the company have gained 8 percent in the past 12 months in Lusaka trading.
The company was arranging funding for the Lusaka expansion, part of which would come from internal cash flows, Rigaux said. Lafarge Zambia would seek to finance some of the e200m in kwacha, and the rest offshore, he said. High interest rates in Zambia made raising cash locally difficult, he said, estimating that the company will complete the financing by mid year.
The market might not be able to absorb the additional volumes of cement, said Brian Chintu, head of investments at Madison Asset Management in Lusaka.
“We’re going to see some price wars,” Chintu said. “We’re going to see pressure for Lafarge to reduce their prices. We anticipate reduced profit margins for Lafarge. Definitely there is a risk of getting an oversupply.” – Bloomberg