Lafarge has rejected an assertion by Kenya’s competition authority that the firm might be flouting competition rules and said it wanted to work with the government to boost returns in the nation’s cement industry.
The Competition Authority of Kenya is probing the Paris-based company’s influence on prices through its 59 percent stake in Bamburi Cement and 42 percent interest in East Africa Portland Cement (EAPCC), the nation’s biggest and third-largest producers, respectively, of the building material. New entrants had diluted Lafarge’s sway over the market, Didier Tresarrieu, the company’s representative on EAPCC’s board, said.
“With the arrival of new players and growing demand, Bamburi’s market share has been decreasing over time and is now in the region of 39 percent,” said Tresarrieu, a former managing director at Bamburi.
“None of the players is dominant and there is therefore no possibility of abuse of a dominant position.”
The competition authority said earlier this month it might force Lafarge to sell some of its interest if the company was found to have a dominant position in violation of antitrust legislation. Its investigation comes amid a dispute between shareholders and the government over ownership of EAPCC. The Treasury holds a 25 percent stake in the company, while the state-owned National Social Security Fund has 27 percent.
The government wanted Lafarge to dilute its shareholding in EAPCC because no company should hold a “monopolistic stake” in Kenyan industries, Industrialisation and Enterprise Development Permanent Secretary Wilson Songa said in February.
Tresarrieu said Lafarge was a “financial investor” in EAPCC and, despite two out of seven seats on the Kenyan company’s board, did not exert any “operational leverage” on its management or operations.
“As a minority shareholder in EAPCC, Lafarge needs to be respected,” he said. “We are on the same page with government because as shareholders we are looking for the same thing, namely a good return on our investment.”
Kenya, east Africa’s biggest economy, has seven cement producers, including ARM Cement, National Cement, Mombasa Cement, Savannah Cement and Cemtech.
France’s Lafarge is the world’s second-largest producer with operations in 64 countries. National, Mombasa and Savannah began operating in Kenya over the past four years, while Cemtech said in July last year that it was building a plant in north-western Kenya.
EAPCC warned last week that full-year profit might drop 25 percent because of increased competition. Sales would fall “dramatically” in the year to June, it said. Kenyan cement prices were the second-highest out of six southern and east African countries, including South Africa. – Bloomberg