The government has directed cement companies in the country to come up with an authentic production cost structure in order to harmonise the prices of the commodity.
Industry and Trade minister Dr Abdallah Kigoda said the move will help the government to know the reasons for price variation between locally produced cement and imported one, which is cheaper.
Dr Kigoda issued the directive yesterday in Dar es Salaam at the inauguration of Kiln 3 upgrading project at Tanzania Portland Cement Company (TPCC).
He said it was difficult for the government to advise on reduction of cement prices in the local market if it did not know the production costs.
“The government is working on modalities to harmonise cement prices in order to protect local industries and create a level playing field, but it should first know the structure of production costs,” Dr Kigoda said.
He said the government's intention was to see cement sold at a price which was affordable to the majority of wananchi, but that would not be possible if the costs of production were not disclosed.
According to cement producers high taxes, poor infrastructure, unreliable electricity supply are among the factors contributing to high cost of production.
A study entitled: ‘Equity Research Cement Sector Local Listed Companies’ released mid this year indicates Tanzania cement production costs are projected to decline in the near future on the back of the falling energy costs and improved supply, hence pushing the country’s competitiveness edge in the region.
Dr Kigoda noted that the government could not put trade barriers on imported cement as had been requested by cement companies because local production was still insufficient.
He admitted that imported cement was sold at a lower price compared to the locally produced one, saying that was a challenge to ensure that local industries competed in the market.
“Currently we have three factories which are Tanga Cement, Mbeya Cement and Twiga Cement, all of which are operational, while four others are in the final construction stages,” he said.
He added that in order to control importation of more cement, local factories had to increase production to meet the demand as the country was surrounded by potential market opportunities such as Southern Africa Development Community (SADC) and the East Africa Community (EAC).
Dr Kigoda clarified that the government was aware of the challenges facing local industries, such as unreliable power, but added that it was taking measures to stabilise the situation.
He mentioned another challenge as high distribution costs caused by poor infrastructure, noting that the government was working to improve railway transport.
For his part, chairperson of Heidelberg cement company board Jean Junon said the cement industry was still facing a number of challenges, including massive importation of subsidised cement.
He said the upgrading of kiln 3 would help to expand the factory's production capacity. “TPCC aims at joining a group of few cement factories in sub-Saharan Africa able to produce more than 2 million tonnes per year," he said.
He added that modernisation of the Kiln 3 will complement kiln 2 and kiln 4, which will allow full utilisation of the company's installed capacity of more than 1.3 million tonnes of cement.
Statistics indicate that the combined production of Tanzania’s three cement manufacturers - Tanzania Portland Cement Company, Mbeya Cement Company Limited and Tanga Cement Company – stands at 1.2 million tonnes against the domestic demand of 1.6 million tonnes a year.
Due to the shortfall, Tanzania has been relying on imports.
At the moment a bag of cement in Dar es Salaam sells at between 14,500/- and 15,500/-, while up-country it sells at 17,000/- and above, depending on transport costs.
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