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Cement exports plummet by 87pc

NEWS
By Otiato Guguyu | July 2nd 2019
Athi River Mining which was put under receivership after it failed to meet its debt payments has been operating at 40 per cent. [Courtesy]

Kenya is paying a huge price for presiding over the collapse of the cement manufacturing industry as domestic exports dropped by 87 per cent over the last three years.

According to the Kenya National Bureau of Statistics (KNBS), the value of cement exports was Sh877 million in the first quarter of 2017. This has fallen sharply to Sh11 million between January and March this year.

While Kenya was reporting up to 98,824 tonnes of cement in the first quarter of 2017, between January and March this year, this had plummeted 11 times to 9,017 tonnes.

Exports are not the only ticker showing the struggle to cement growth in the sector, with the home front suffering from slowing down of infrastructure projects such as the Standard Gauge Railway and depressed real estate market.

According to Cytonn Investments' half-year real estate market review, the sector recorded subdued performance, with the office and retail sector recording a decline in average yields by 0.3 per cent and 0.8 per cent points, while the residential sector recorded a marginal 0.2 per cent points appreciation in average yields.

“The performance was constrained by oversupply in selected sectors such as the commercial office and retail sectors with a surplus of 5.2mn and 2.0mn SQFT, respectively, as at 2018, and inaccessibility of financing by both developers and off-takers,” Cytonn Investments said.

According to Kenya Bankers Association’s Housing Prices Index for Quarter One, home prices were down 2.78 per cent as a result of a delayed effect of the decline in loans to the construction sector and to home buyers which has cut both supply and demand over the last one and a half years.

“This is the third decline since the index base period with the other two instances reported in the last quarter of 2013 and the third quarter of 2014,” said KBA Director of Research and Policy Jared Osoro.

Companies in the cement businesses have been struggling to yield profits with some of the leading producers facing financial turmoil. This has curtailed their ability to produce to capacity.

East Africa Portland Cement, the pioneer cement maker, which was established in 1933 has been operating at half capacity, with some 1.3 million tonnes of raw materials and churning out a paltry 6,000 tonnes of cement.

The cement maker needs Sh2 billion to put its machines back to full production capacity.

Athi River Mining which was put under receivership after it failed to meet its debt payments has been operating at 40 per cent - from a high of 900,000 tonnes of cement making about Sh2 billion annually between 2010 and 2016.

ARM has since been bought by Devki Group which is in line to become the second largest cement maker in Kenya after they acquired the troubled cement maker’s assets for Sh5 billion.

The maker of Simba brand under National Cement subsidiary recently acquired Cemtech which holds limestone and clay deposits, and the requisite licences, in West Pokot County. Limestone and clay are the key input in clinker production.

Kenya National Bureau of Statistics put Bamburi’s market share at 33 per cent followed by Mombasa Cement at 16 per cent, East African Portland Cement Company at 15 per cent and Savannah Cement 15 per cent as at December 2018.

National Cement was at eight per cent while Athi River Mining Africa was at 13 per cent.

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