East Africa

Recent killings in Ethiopia point to difficult times for Dangote Cement

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.

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.

“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.

“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.

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.

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 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.

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