The Zambian cement industry has all the hallmarks of a dysfunctional sector as the Zambian Business Times – ZBT can reveal that its initial analysis and random survey of the existing pricing mechanisms by top producers defeats known economic priciples.
Economies of scale in industrial economics entails that large producers gain savings in cost by an increased level of production and hence are expected to price more competitively than low volume producers.
But in Zambia, the top cement producers like Sinoma, Lafarge, Dangote and Zambezi Portland seem to have higher retail prices than the lower production cement plants. The ZBT survey has revealed that Amaka Cement by Scirocco Enterprise and Great Wall Cement by Baudot are currently the lowest priced at about K110 per 50kg bag of 32.5N cement.
The top producer who ideally should be passing on economies of scale benefits to their customers have higher prices ranging from K117 to K125 for 32.5N cement. A further check with most retail outlets show that Great Wall cement and Amaka cement despite their plant sizes are the cement brands with the lowest price points.
Speaking in an exclusive interview with ZBT, Baudot Cement Zambia Business Manager Mira Zheng stated that, at the moment, they have limited production capacity due to their installed plant size and may in future increase their capacity. Zheng stated that Baudot is comfortable with its current marke as they have loyal customers who continue to support them.
“Actually, we are a small plant, unlike Lafarge, Zambezi Portland, Dangote and Sinoma who are big and have a big plant capacity. Our plant can produce between 2,000 to 3,000 tons of cement per month, which translates to about 24,000 to 36,000 tons per annum ”, she said.
Furthermore, Zheng stressed that they produce to the current capacity and that the plant kiln operates 24hrs. The company produce cement that is enough and is mostly bought off by the old and existing wholesale customers.
“We have some old customers and return customers on the market, I think its ok for us because our whole production is not a lot [relatively], so what we produced is almost sold out and finished. So far we don’t have any new customers. If the new customer comes, we can’t sell to them because what we have has already been ordered by the old customers” she said.
And when asked by ZBT on whether they have plans to expand the plant to take advantage of their competitive price point, Mira said that there are many things that the company will need to consider before taking that step of increasing plant capacity.
“The Investment needed in equipment and manufacturing plant is huge, there are many other factors we need to consider. So it’s not like a month decision, but a long term one. You have to plan and budget for the cement production, and do a detailed market research before embarking on expansion.
Calls for a thorough investigation into the Zambian Cement Industry have increased with anti-trust regulator CCPC confirming that it is currently investigating the top four cement producers for possible market abuse related charges. CCPC is yet to to give an update on their investigation.
