Uganda’s cement industry has seen a sudden reverse in prospects as the country’s Bureau of Statistics (UBOS) warned of lower cement production during the months of March and April 2016 and a drop off construction sector activity.
Domestic cement producers have been reporting higher costs of production following the election, and depreciation of the Ugandan shilling (UGX) as reasons for the decline in output. UBOS stated that cement supply fell by 14.8 per cent in April 2016 compared to March 2016, or in terms of volume from 205,890t in March to 187,300t in April.
Infrastructure developments
It is the large infrastructure projects that are key to Uganda’s cement demand and if supplies start to fall short here then it will impact on economic growth. The Karuma power construction project reported in April that contractors had failed to procure cement from Hima and Tororo Cement with sufficient qualities and quantities. The project required high grade 42.5 cement and extra supplies had to be sourced from Savannah Cement in Kenya.
As recently as June 2016, Uganda’s finance minister, Matia Kasaija urged local contractors to build capacity to become more competitive and bid for large infrastructure projects. These big projects include the Kampala-Entebbe Expressway and the Karuma and Isimbia hydroelectric dam projects. Major housing projects include the Jomayi Estates project, Mega City (20 minutes from Kampala) and the Naguru-Nakawa Satellite Town Development. The Jomayi development has already been slow to progress though due to a financial dispute over an unpaid loan.
Cement prices
The lower availability of cement in Uganda has been reflected in the prices, which rose to UGX30,000 (US$8.8)/50kg bag by March 2016. This may cause the government to rethink its plans to raise the excise duty on cement from UGX500 (US$0.15) to UGX1000 (US$0.29)/50kg bag, as the state is looking to encourage construction. However, the government also needs to raise revenues to cover its increased budget expenditure for 2016/17 which is set at UGX14.4trn (US$4.2bn), up from UGX11trn (US$3.2bn) in 2015/16.
Cement sector
Cement capacity in the country stands at 3.6Mta with Tororo Cement and Hima Cement as the main suppliers, although minor production also comes from Moroto Cement, Kampala Cement Company Ltd and DAO Group’s recently established 5000tpd Budaka plant. Further expansion is also underway at Tororo Cement Ltd which is in the middle of a US$25m upgrade project to take its plant capacity from 1.8Mta to 3Mta.
Meanwhile, Lafarge Hima Cement has been working to reduce its reliance on fossil fuels. The company now uses biomass for 57 per cent of its fuel needs, while its last major upgrade was an installation of a bag filter in 2013.
Last year, Kenyan cement producer National Cement revealed plans for construction of a US$195m cement plant in Mbale, Uganda, 270km east of Kampala. This greenfield plant will have a cement capacity of 1Mta. A smaller project by WM Wind Cement Co to build a 500tpa cement and marble factory in Karamoja was announced in January 2016.
Uganda imports approximately 0.4Mta of cement according to UBOS. During March to April 2016 imports fell from 38,380tpm to 22,120tpm.
