Mining & Trade News

Local producers of cement have bemoaned the continued shortage of foreign exchange coupled with the decision by the Malawi Government to continue issuing more cement import licences to traders saying the situation may prompt them to close shop leading to hundreds of Malawians, directly and indirectly employed by the industry, losing jobs.

The Ministry of Trade and Industry announced last month that it had issued 30 import licences to cement traders to ensure adequate supply of the product on the market to address the escalating prices.

The development came after the Ministry had also issued cement import licences to contractors working on big donor funded road projects in light of cement shortages.

But commenting on the development in an interview, Chairman of Cement Products Limited (CPL) Aslam Gaffar said the root cause of the cement shortages is underproduction by local manufacturers due to shortage of foreign exchange to import raw materials and spare parts for plants stressing on the need to make more foreign exchange available to the cement manufacturers to import raw materials.

“We, local producers, have the capacity to meet the demand on the Malawi market but what we need is foreign exchange, which is not readily available, to import raw materials and spare parts to maintain our clinker production plants and grinding mills to produce at full capacity,” he said.

Gaffar explained that the escalating prices of cement on the local market are as a result of profiteering by traders who are charging similar prices for local and imported cement brands of the same attributes.

A snap survey by Mining & Trade Review in the major cities of Lilongwe and Blantyre confirmed Gaffar’s observation with prices for CPL’s most popular brand Njati and Shayona Cement Corporation’s leading brand Akshar fetching up to K18,000 at par with imported brands such as Sinoma from Zambia of similar strength. However, the ex-factory price for Njati is K9,800.

Gaffar observed that in a fair market situation, the foreign brands world have fetched higher prices than local brands of similar attributes taking into account transport costs and the surcharge that Government charges on imported cement.

“We, producers, are not doing import parity pricing but the resellers. Government needs to find ways of regulating the market in order to bring sanity and deal with escalation of prices for locally produced brands,” he said.

Gaffar also urged the contractors working on donor funded road projects, who are paid in US Dollars, to buy cement from the local manufacturers.

“These road projects are either European Union or World Bank funded implying that the contractors are receiving dollars. We need that Dollar to pay for our inputs but these contractors prefer to sell the Dollar at premiums and buy cement from our distributors at premium prices, and because the Dollar has been sold at a premium, they make more money,” he said.

CPL and Shayona are the only companies that produce clinker locally with CPL owning a clinker factory at Njereza in Mangochi and Shayona running a plant in Kasungu. The other local cement producer, Portland, imports clinker which is processed into cement at its factory in Blantyre.

Shayona Cement MD Jitendra Patel in a separate interview also expressed concern over Government’s move to issue more cement import licenses to traders describing it as killing the local industry.

“This shows lack of seriousness by Government to nurture the local industry to ensure that it continues creating more job opportunities while reducing the national import bill,” he said.

Patel wondered where is the logic on the part of Government in encouraging cement imports which are a drain in foreign exchange when the local producers are failing to meet the country’s cement demand due to reduced production as a result of shortage of foreign exchange to import raw materials and spare parts for maintenance of their plants.

“Importing cement as a finished product requires a lot of forex; only a fraction of that is what we need for our raw materials since we source limestone, which is a key ingredient, and some other raw materials locally,” Patel said.

Coordinator for Chamber of Mines and Energy in Malawi Grain Malunga commented in a separate interview that it will be interesting to see how these licensed importers find foreign exchange when cement producers are failing to access the same to import raw materials.

Malunga also encouraged the cement producers to find ways to source more raw materials such as gypsum, iron ore, coal and kaolinitic clays locally.

“These Companies need to explore ways to partners with local gypsum miners to source the raw material from local producers,” he said. 

But Ministry of Trade and Industry Spokesperson Mayeso Msokera was quoted in the local media as saying Government will continue issuing import licenses to traders to supplement the deficit from local production.

Msokera said the licenses are valid for one year with specific limitations on quantities assigned to a trader.

Shayona Cement is a leading producer of cement in Malawi with a production capacity of 1,500 tonnes per day, and is conducting an expansion programme for its plant to increase production to 2,500 tonnes per day.

CPL, which is also running an expansion programme for its factory, has a production capacity of 1,000 tonnes per day.

Malawi has an annual market demand of about 1.8-million tonnes which the producers say they can easily meet but are producing very low quantities due to lack of foreign exchange to import raw materials and spare parts for the machines.    

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