How has Dangote Industries fared in the Zambian market?
We began our Zambian operations in July 2015, with Aliko Dangote and the President of Zambia His Excellency Edgar Chagwa Lungu officially opening the company in August 4, 2015. With the currency depreciating, the copper price dipping, and the market shrinking, it was not the easiest time to launch operations. However, in spite of these setbacks, the Dangote brand was well accepted in the country. Our arrival was hotly anticipated, owing to increased demand in the cement business and certain supply deficits that led to upticks in prices and delayed construction of roads and houses. With Dangote's entrance, prices have come down and stabilized. Stability was vital, as it afforded people the opportunity to plan longer-term projects more accurately.
What opportunities does Zambia present for Dangote, and how have you tailored your products to meet these?
When we entered the market, we did so with two types of products: Dangote 3X, our standard 42.5R product that can be found everywhere we operate, and a 32.5R product. In 2017, we then added a 32.5N product, looking to serve the growing demand in the road and home construction segments. Zambia also presents us with another key opportunity, which is the potential for export, with its eight bordering countries, many of which are not yet self-sufficient in terms of in-house cement production. Secondly, cement prices in these neighboring countries are higher, which means that, even with transport costs, our prices are competitive. The problems we face include instability in terms of legislation, for example, in countries like the DRC, as well as competition from well-established brands.
What is the current capacity of the plant?
The capacity of our plant is 1.5 million tons. We are currently operating below that, due to dampened supply following the recession and the rainy season. At peak months, however, we reach 80-90% of our capacity. Looking at the market we see that the overall cement production capacity in the country stands at 3.4 million tons, and we estimate that market demand in the country is about 1.5 million tons. Further capacity expansion will be driven by increased demand from the local market.
What advances have you made in transport?
We are working hard to ensure the utmost safety precautions are being taken in our transport division. We have put tracking systems in place, hired more trainers, and have seen a significant improvement in our drivers' behavior. At the same time, the road infrastructure of Zambia is difficult to negotiate and the building of new roads connecting parts of the country will surely increase commerce. The government is considering introducing a statutory instrument for heavy goods, forcing companies to move 35% of certain heavy cargo onto rail. This is an extremely sensible initiative in terms of protecting road infrastructure from continuous damage; however, Zambia currently lacks the rail infrastructure for the 35% target to be achievable. The government should start with 5% and then slowly increase this, eventually reaching the 35% target as the rail infrastructure and rail efficiency improves.
What are Dangote's ambitions in Zambia for the medium term?
We want to make our debut in the bulk market here, where currently we have a low profile, and are securing investments in order to effectively participate in this segment. We already have the product—our cement services high-end construction such as dams, airports and so on—although currently we only supply in limited quantities. In the medium term, though, our focus will be on market penetration. We still need to raise awareness about our presence and familiarize customers with our products. There is some user education required, which will be another of our key areas of concentration which also extends into learning and development and skills transfer of Dangote employees and partners. Finally, we want to use Zambia as a starting point to explore other areas in the region, such as Malawi and the DRC.