SOLID STATE

Zambia 2017 | INDUSTRY | VIP INTERVIEW

TBY talks to Desmond Maharaj, Country Head/CEO of Dangote Industries (Z) Ltd, on establishing brand awareness, the country's cement production capacity, and plans for the medium term.

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 Mr. Edgar Chagwa Lungu officially opening the company in August 4, 2015. It has been an interesting journey for the company since then, considering the recession that followed not long after we broke ground for the construction of our industrial complex in late 2011. With the currency depreciating, the copper price dipping, and the market shrinking, it was not the easiest time to launch operations. We also learnt that there is a great deal of seasonality in the cement market in Zambia. In the rainy season, for example, cement sales drop dramatically. 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. The product deficit led to upticks in prices and forced people to curb construction on roads and houses. With Dangote's entrance, prices have come down and stabilized. Stability was vital, as it afforded people to opportunity to plan longer-term projects more accurately.

Did load shedding impact Dangote's activities in Zambia?

While the country experienced severe power shortages, and all the complications that this brought with it, Dangote was extremely fortunate in that we are self-reliant on power. Our industrial complex includes a quarry, where we mine our own limestone, and our own power plant, where we produce 30MW of power, which is actually more than we need resulting in Dangote being in negotiations with power companies to sell some of the excess power into the national grid. Our complex also includes a state-of-the-art cement plant, which has by far the best technology in the country, the transport division and an administration section. Our fleet consists of almost 400 vehicles, which allows us to provide customized logistics solutions for the consumer, another way in which we differentiate ourselves from other offerings on the market. We generally take this holistic approach to setting up business in the country. Dangote superior quality plants result in the best quality cement for the consumer.

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 the 42.5R, our standard product that can be found everywhere we operate, and a 32.5 R product. In 2017, we then added a 32.5 N 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 not 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, to say the least. There is a great deal of development needed. 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, at the time Zambia lacks the rail infrastructure for the 35% target to be achievable. At the moment, there are rail tracks linking Ndola in the north to Livingstone in the south, and a little of the east up to Nakonde, but that is all. The intention is great; however, the implementation requires refinement. The government should start at 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 by May 2017. We already have the product—our cement services high-end construction such as dams, airports and so on—although at the moment we only supply in limited quantities. In the medium-term, though our focus will be on market penetration. We are only 20 months in the Zambian market, and 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.