The Growth of the Cement Industry in Africa

PLANS by Nigerian industrialist Aliko Dangote to invest in the Mbinga coalmine to use the minerals as energy in the production of cement in his planned large cement firm at Mtwara is likely to kick-start a re-engineering of energy sources in the country’s fledgling industrial sector, a section of observers believe. The reason is that the industrialist seeks large production activity and is also investing in a 300mw plant in Mtwara, to boost industrial activity and conversion of natural gas to electricity, but seeks to use coal to generate cheaper power for the cement factory. That should lay the basis for other industrialists to use that source to diminish their own costs .

 

The Nigerian industrialist and top rated businessman on the continent, whose key specialty is cement where he runs factories in a number of African states apart from his Nigerian homeland, made remarks in that direction on the sidelines of an important investment conference attended recently by Vice President Dr Mohamed Gharib Bilal in Dubai. He made mention of those plans in his conversions with Dr Bilal at that conference, the second Africa  Global Business Forum hosted by the United Arab Emirates. The Nigerian magnate is perhaps the single most important industrialist on the Tanzanian scene, set to change the country’s outlook in cement and energy sectors.

 

Already observers and government officials were extremely happy with the investor’s move to dig deep into Mtwara to place a few of his most important investment in the country, on account of a cry from that area to get a bigger slice of economic activity that uses natural gas within the region. Now the industrialist is raising the stakes in a different area, that the country’s untapped coal resources are part of its future and not an irrelevant resource of the 19th century, and not applicable in this era of green technologies, etc. Coal is a resource of prime importance in energy production as it is just a matter of burning it, unlike hydroelectricity which has to be generated in a more expensive manner, or gas that has to be processed in an even more expensive outlay. Coal is plentiful in Tanzania.

 

Analysts are not surprised that it is in the cement sphere that the idea of using coal has surfaced most strongly, as cement factories use large amounts of electricity, where in Dar es Salaam it has habitually been Wazo Hill cement factory that is considered the biggest power guzzler in the city. With the right infrastructure more large consumers of power could switch to using coal and letting available electricity be spent on activities where burning coal can’t do to generate energy, and it is possible some other industrialists would see the manner they can adapt their energy needs to such resource if it is cheaply available. Dangote is largely the first to come up with practical plans in that direction, whereas planners in the National Development Corporation (NDC) habitually see coal as another area for generating electricity, despite that the country has numerous hydropower sources, and gas is now added.

 

Another sphere where this initiative could start making a difference is in costing of cement, as local industries have been urging the government to place higher taxes on cement imported from outside, citing in particular Pakistan, that it was undercutting the market for local cement, which is assailed by high taxes and circumventing factors in seeking to keep its costs down. With this initiative, and especially if the railway system is improved enough for coal to be transported cheaply around the regions, large energy users who use boilers could avoid high costs of hydro or gas generated electricity, not to speak of heavy fuel generators for instance the one still being used at the Tegeta power plant, by Independent Power (T) Ltd. The plant under its new owners is billed to shift to natural gas.

 

With the Nigerian industrialist, the best thing to do is to place the factory not far from the coalmine, and with the railway planned from the Mtwara seaport to the shores of Lake Nyasa, if it has investors like Dangote and others so that it can be implemented rapidly, more industries could be constructed in the zone, using coal from the Mbinga mine or others. There is plenty of coal in the Mchuchuma coalfield but the Nigerian investor seeks to put up his own investment so that costs can be controlled, part of the reason being that the ownership of the coalfield is not entirely in the private sector, and purchasing energy or resources from the government via a parastatal organization can be a problem. That is what Wazo Hill investors and others reel from, without viable answers up to now, and might find it more useful to follow the lead of the more recent newcomer to the local industrial scene.

 

However the road is not going to be altogether rosy as activists could start pointing out that coal has a greater incidence of environmental impact for instance from greenhouse gases than other sources of energy. Yet it is unlikely that a generalized argument about greenhouse gases could make an impact, except if there are local limitations of using such energy, or the kind of systemic controls enabling limited impact on the surrounding areas, not affecting local ecosystems for example. Unlike the use of mercury in washing out soils to obtain gold pieces, coal does not spread out into the environment via the soil but air, and has in some cases constituted an agency to overly change climatic phenomena when its use is on large scale, as it was so in various industrial states in Europe.

 

The degree to which coal is still being used to generate energy differs from one zone to another, with Europe having generally abandoned the use of the resource, while rapidly industrializing China is seen as the worst offender in green house gases largely on account of its extensive use of coal. There is still a lot of coal use in South Africa where it has sparked a measure of debate, which means substantial coal use in the local context is likely to attract a degree of environmental unrest as coal is inseparable from heavy smoke, soot and at times significant localized climatic disturbances. Yet at incipient stages of large industries, it might be the break investors need.

 

In that case the degree to which Dangote may succeed to cheapen his products and dampen pressures for higher taxes on cement imports would also indicate that other industrialists can do the same by adopting use of the resource. That is also going to add pressure for opening more mines or liberalizing ownership of existing mines in case they are not run by the most efficient producers, while also keeping the lid on rising electricity prices. In case many industries abandon the use of electricity at least for heavy energy needs, in a situation where electricity generation is set to rise, it would also ignite organizational change on the part of TANESCO and its affiliated energy producers. The local industrial scene becomes more competitive, when energy is less monopolized than at present.