Government’s import licences anger manufacturers
There is a cement war raging in the country with Malawi’s cement manufacturers crying foul over the cement imports into the country after Ministry of Trade and Industry issued imports licence to some traders.
Some of the traders licensed to import the product have defended government’s action, saying it has kept the prices of the product down and therefore affordable for the local consumer.
Government, on the other hand, has also defended its move to allow the cement imports because it believes that there are even more cement market opportunities for the local industry to take advantage of.
Malawi News has established that seven different trading companies have between February and March this year been given cement import licences by the Ministry of Industry and Trade to import 80,000 tonnes of cement a year into the country, which is equivalent to about 25 percent of Malawi’s cement demand.
As a result, hardware shops especially in the northern and central regions of the country are now awash with imported cement from Tanzania and Zambia which is selling at almost the same price as locally produced cement at between K5,500 and K6,500 per 50 kilogramme bag.
Dangote cement from Zambia is particularly dominant in Lilongwe and its pricing in Malawi is said to be the same as the one in Zambia.
Local cement manufacturers have cried foul, fearing that the pricing is intent on killing the Malawi cement industry.
“We sincerely believe that the Zambian/Tanzanian manufacturers have adopted a predatory pricing with the intention of destroying our local industry, thus making huge profits at a later date, when we are non- operational,” said Cement Products Limited managing director Aslam Gaffar in an interview.
“You see, the cement is manufactured in Ndola or Lusaka and sells at US$5per bag. Whereas the same cement is being sold at the very same US$5 per bag at Chipata which is next door to Malawi. What has happened to the freight or transport component?” wondered Gaffar.
He added:
“The transport rate per tonne from Ndola to Malawi is not less than US$100 per tonne and in a tonne of cement there is 20 bags, which works out to US$5 per bag on transport alone. So how can these manufacturers sell at the equivalent of transport alone, in Malawi. What about the production cost? This is where the predatory pricing comes into play.”
Malawi’s annual cement demand is currently estimated at 375,000 tonnes a year and local manufacturers say they have capacity to produce 410,000 tonnes a year, with Lafarge producing 250,000 tonnes and Shayona and Cement Products Limited producing 80,000 tonnes each.
The Ministry of Industry and Trade says it has given out the licences because there is no ban for cement importation and that the importers satisfied the requirements.
“The Ministry introduced import licensing to regulate, bring sanity to the cement trade and curb rampant smuggling that was bedeviling the cement industry,” said Ministry of Industry and Trade spokesperson, Wiskes Nkombezi, adding:
“The imported cement is also helping under-served areas. We should also remember that imported cement and locally produced cement has been competing on the market for a long time.”
Gulam Chunara, owner of Randera and Chunara hardware stores – two of the main shops selling Dangote cement in Lilongwe and surrounding districts –also defended cement importation into Malawi, saying they have, among other things, increased competition and helped keep prices for the cement lower.
“The price of a bag of cement was [before the recent devaluation] at about US$12 [K6,000] per bag and it should have gone up to K9,000 after the devaluation. But the imports have helped control the price,” claims Chunara.
But Lafarge Cement managing director, Ilse Borshoff, disputes Chunara’s claims.
She faulted the government for giving out import licences to mere traders instead of reserving them for existing producers to use them when they face supply challenges and help them protect their investments as well as jobs they create and taxes they pay to the government.
“We thought the recent cement import regulation was a welcome idea as it intended to address challenges local manufacturers face considering that they have invested in this country.
“Our sad observation is that this will potentially kill the industry as everyone may import, sacrificing the investment by local manufactures. This will destroy the industry and its affects would be bad for the country,” said Borshoff.
Gaffar also agrees with Borshoff, saying cement imports are threatening 2,000 local jobs created by the three companies as well as substantial revenue to the government.
He believes the aspect of foreign exchange flight alone should warrant government to take a stronger stance in protecting the local cement producers.
“We are always short of foreign exchange, which has led to very high exchange rate, thereby causing some suffering to the people. Obviously there are other benefits like creating employment, collection taxes and not forgetting the creation of in-trading, in the vicinity, where these factory projects are being developed,” said Gaffar.
He said if cement imports continue, his company will suspend the second phase of its factory which it is currently undertaking to double its production capacity to 20,000 bags a day.
“If cement importation continues, obviously we may not be able to complete our phase two and may stall the project for some time,” he said.
Asked whether the cement scenario was in line with the Buy Malawi Strategy as launched by President Peter Mutharika recently, Ministry of Trade and Industry’s Nkombezi said Malawians should make a choice of either supporting imported cement or locally produced cement.
“In actual sense there is still more market opportunities that local producers need to exploit,” he said.
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