Competition mounts for East Africa market share

Public sector infrastructure projects and the rapidly growing middle class in the East Africa region will be the main drivers of cement consumption as competition is set to intensify with the arrival of new market entrants.

Speaking to AllAfrica press, Kephar Tande, chairman of the East African Cement Producers Association, said Friday that the ongoing regional trade integration and an expected surge in housing demand will be the new battlefront for market share as new players enter the market.

"Infrastructure is top priority all across the regional trade bloc and this will be the engine of growth. The region's middle class is also growing rapidly and the young population is expected to boost demand for housing," said Tande, also managing director of East African Portland Cement Company.

"This are the two aspects that will change the scenario." Competition in the market has intensified on the back of new entrants – Mombasa Cement, National Cement and Savannah Cement – and expanded capacities by existing producers, which is expected to keep prices of the key construction commodity stable. Price undercutting has been noted to be the main way cement makers capture market share in Kenya as opposed to relying on supply and demand forces.

"There is more pressure and we are unlikely to see growth in prices in the foreseeable moment." Current retail prices of the commodity range from KES650 to KES720 [US$7.7 - US$8.5] depending on the brand and distance from factory. Tande said the slowdown in building and construction sector has impacted negatively on cement consumption.

"We are certainly feeling the pressure. Demand has cooled down as many consumers adopt a wait-and-see attitude," he said, adding that the going will be a little difficult for cement producers until the credit sector recovers. Consumption per capita stands at about 58kg a year in Kenya, which is slightly below the regional level of 60kg.