In the face of overcapacity and cheap imports in the local market, cement producers in Tanzania remain optimistic about future prospects, which seem more positive in light of a continuing construction boom. Tanzania has an installed production capacity of 8.3Mta and a current demand of only 4.3Mta, but major infrastructure projects are expected to drive business and boost growth.
Local producer Tanga Cement reported a decline in profit for 2015 compared to the previous year as a result of new entrants to the market creating tougher competition and lowering Tanga's sales volumes. The company saw sales revenue decline 9.9 per cent compared to the previous year and net profit reached just TZS8.24bn (US$3.8m), down from TZS28.4bn in 2014. However, for the 1H16 Tanga Cement recorded a 55 per cent increase in net operating profit thanks to the commissioning of a second kiln in December 2015 and initiatives to boost operational efficiency.
Arthi Rhino Cement, Camel Cement, Lake Cement, Lee Building Materials and Dangote Cement joined the Tanzanian market, creating competition for Tanzania Portland Cement Co (TPCC), Tanga Cement and Mbeya Cement, three major producers that had dominated the market for years. Dangote’s arrival in Tanzania had the biggest effect as it dropped its cement prices only a few months after it began operations. Other players had to follow suit and produce promotional campaigns to survive.
With the increased competition and challenging business landscape, the outlook remains bright. Key infrastructure projects are expected to begin this financial year, including the construction of a US$6.7bn railway that will connect Rwanda and Burundi with the Indian Ocean, a megaport and economic zone at Bagamoyo that is expected to cost at least US$10bn and a proposed US$4bn oil pipeline. The government has raised spending by 31 per cent in the current fiscal year, focussing on infrastructure and industrial projects.
