The Competition and Consumer Protection Commission – CCPC has ordered the slashing of cement prices from the current average prices of K140 per 50kg bag to K110 per 50kg bag, a reduction by 21%.
According to a statement made available to the Zambian Business Times – ZBT by CCPC Senior Public Relations Officer Namukolo Kasumpa, the CCPC Board has ordered publicly listed Lafarge Zambia and privately held Dangote Cement and Mpande Limestone (Commonly known as Sinoma) to revert the cement market prices to pre-cartel prices.
“The CCPC Board has ordered Larfage Zambia Plc, Mpande Limestone and Dangote Cement to revert to the pre-cartel prices ranging between US$4.5 – U$5 for a period of upto 1 year effective [31 March 2021] date of receipt of the board decision”, stated Kasumpa
A quick conversion of the announced upper bound US dollar reference price of US$5 means that the market prices of cement are expected to be K110 at an average exchange rate of K22 per 1US$. This effectively means that cement market prices have been slashed from the current average prices of K140 to K110 per 50kg bag, a reduction of 21%.
The bureaucrats at CCPC seems to have this time around done their homework by using the very explanation by the cement companies who have previously justified the price increases on the depreciation of the Kwacha. The top cement producers have for all the previous two upward adjustment prices sited having a US dollar denominated cost structure as the main reason behind the price hikes.
The Zambian Business Times – ZBT had extensively followed through customer complaints and received whistle blower information via ZBT Facebook inbox and official email address editor@zambianbusinesstimes.com which was followed through with a series of articles and engagement with the regulator CCPC, cement industry experts and other stakeholders that has finally led to this price cut.
CCPC further stated that the decision to fine Lafarge Zambia Plc and Mpande Limestone Limited was made during the 49th Board of Commissioners Meeting for the Adjudication of Cases held in Lusaka on 30th March 2021.
Namukolo stated that after an exhaustive investigation by the Commission initiated in January 2020, following the Commission’s observations of a sustained increment of cement prices from an average of K55 to K100 per 50Kg bag between July 2019 and January 2020. The continuous price increment of cement by the parties led the Commission to suspect that there was possible collusion and an agreement to fix the prices of cement.
She said that the investigation which lasted for over one (1) year revealed that the parties shared price adjustment proposals seeking approval for price changes before the implementation date and in some cases before they were approved by their respective management. The exchange of commercially sensitive information on future prices and rebates demonstrated that there was a ‘meeting of minds’ among the Respondents to pursue an agreed objective.
The CCPC investigation established that company representatives from Mpande Limestone Limited, Dangote Cement Zambia Limited and Lafarge Zambia Plc held discussions and meetings which resulted in the development of a pricing philosophy to stop cement price reductions. The investigations also established that the Cement Companies had agreed on a flat rebate of ZMW3 sometime in December 2019.
The Board of CCPC determined that the sharing or exchange of commercially sensitive information relating to future prices and rebates by Mpande Limestone Limited, Dangote Cement Zambia Limited and Lafarge Zambia Plc amounted to an agreement. The Board of Commissioners further determined that this agreement was anti-competitive as it was used to fix the price of cement and share markets contrary to Section 9(1) (a) and (b) of the Act respectively.
The statement stated that CCPC Board notes that infrastructure development is the backbone of social- economic development and one of the Government’s key priority areas in the Seventh National Development Plan. The construction industry is very important for Zambia’s economic growth, infrastructural development and employment generation and the cement industry plays a vital part of this infrastructure development. The fixing of cement prices by the three Companies and setting of trade conditions therefore undermined a competitive market and was detrimental to consumers.
While the Board of Commissioners takes cognisance of the role Mpande Limestone Limited, Dangote Cement Zambia Limited and Lafarge Zambia Plc, play in the economy in general and their contribution to employment creation, their conduct had the serious effect of undermining infrastructure development both private and public especially with Government’s continued thrust on infrastructure development projects from roads, schools, clinics and development of district centres among others.
Based on these facts, the Board decided to fine Lafarge Zambia Plc and Mpande Limestone Limited the maximum fine of 10% of their annual turnovers for the two (2) years of 2019 and 2020 for price fixing and market sharing. The Board noted that Dangote Cement Zambia Limited was granted leniency as they were the only Leniency applicant and assisted with investigations.
Efforts to get comments from cement producers on what actions they intend to take and whether the cut in cement prices will be effected immediately are still underway by the time of publishing this article. See other articles done by ZBT on the cement industry Zambia Cement industry dysfunctional
See other articles by ZBT on the cement industry Cement companies accused of collusion., CCPC mute over cement price increase, Gypsum accounts for 5% in cement prices
