Cement manufacturer Athi River Mining entry into the Tanzania market will enable the company enjoy easier access to Southern Africa Development Community member states.
According to the firm’s managing director Pradeep Paunrana, the Ksh8.6 billion ($110.2 million) cement plant in Tanga to be completed next year will produce 4,000 tonnes of cement a day — about 1.5 million tonnes a year.
Speaking when he introduced the firm’s new chairman Rick Ashley, Mr Paunrana said the Tanga plant would have the largest capacity in East and Central Africa.
The Tanzania investment comes at a time when the firm is expanding its facilities at Kaloleni at a cost of Ksh1.5 billion ($19.2 million) from the current 300,000 tonnes to 750,000 tonnes by the end of next year.
SADC member states include Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. The combined income of the SADC market is $431 billion while its population stands at 247 million.
Mr Ashley, who joins ARM as a non executive chairman, has held senior positions in financial services industry in Kenya for more than 20 years.
His association with the cement manufacturer goes back to 1997 when he helped arrange ARM’s listing on the Nairobi Stock Exchange.
At the same time, the cement manufacturer announced plans for a Ksh2.3 billion ($29.5 million) electricity generation plant in Kaloleni in the next two years.
This will be the first cement firm to put up a power plant.
Two months ago, Mumias Sugar Company started selling 26MW from its co-generated power plant at US cents 6 per kilowatt hour to KPLC. The sugar miller is producing electricity by burning bagasse, the fibrous residue that remains when sugarcane is crushed.
The Kaloleni plant, which will use coal is projected to produce 30MW of which 19MW will be sold to the national grid.
This will help cut our energy costs by more than 25 per cent. Reduced energy costs will mean cheaper cement in the market,” said Mr Ashley.
This would be a huge savings for the company whose electricity bill accounts for 30 per cent of its total expenses.
The company said it would be importing coal from South Africa, which it said is of high quality. Coal as a source of electricity has advantages over fuel-based sources in that it is relatively cheap and easier to extract.
The new business would be under the company’s new subsidiary — ARM Energy.
The cement firm needs new sources of energy as it starts expansion of its production to add to its 360,000-tonne annual capacity.
New cement capacities will help bridge a projected shortfall as consumption increases.
Currently, the Kenya manufacturing sector is facing a looming power crisis.
The country’s power distributor, Kenya Power and Lighting Company (KPLC) has asked big commercial and industrial customers who account for 40 per cent of the total power consumption to reduce peak-time consumption so as to allow the available electricity to last longer.
Manufacturers are demanding discounts of up to 50 per cent on the current electricity bills before shifting production to late night shifts.
KPLC on the other hand insists that it will only give a waiver on electricity consumed between 11pm and 5am.
KPLC projects a supply capacity shortfall at high levels of 80MW-144MW during this period against a projected peak demand of 1,070MW for the same period.
The country’s total installed capacity is 1,200MW with a generation mix of 56 per cent hydro, 36 per cent thermal and eight per cent geothermal.
Kenya’s cement consumption, considered a key indicator of activity in the building sector, increased by seven per cent from two million tonnes in 2007 to 2.2 million tonnes last year, according to the Economic Survey 2009.
The demand for cement in East Africa is also growing rapidly.
It is projected to increase by 10 per cent this year and if the status quo remains, this would result into serious shortages.
ARM is looking at the possibility of hiking the Kaloleni plant’s capacity by a further 50 per cent due to the existence of a regional shortage in clinker capacity.
Among other expansion initiatives, ARM’s third sodium silicate plant will be commissioned before the end of this year.
Sodium silicate, a compound used in cements, has a number of other industrial uses.
There are also plans to double its lime production capacity in Tanzania next year. Lime is used in clinker production.
