Driving Africa’s infrastructure agenda through cement
Hinging his motivation to invest in setting up cement plants in 16 countries across the continent on his belief that Africa’s future growth is intrinsically linked to cement, the most basic input into building infrastructure, Aliko Dangote in Ndola, Zambia, unveils plans to consolidate his pan-African cement agenda as part of efforts to address Africa’s infrastructure deficit. FEMI ADEKOYA writes.
In most African countries, infrastructure is a major constraint on doing business, and is found to depress firm productivity by around 40 percent, according to analysis form development finance institutions.
For most countries, the negative impact of deficient infrastructure is at least as large as that associated with corruption, crime, financial market and red tape constraints.
Indeed, the rapid expansion of production capacity across sub-Saharan Africa has led to a sharp drop in cement imports, reversing the deficit that has built up over the past decade.
For instance, Nigeria, which as recently as 2010 was importing $500million worth of cement each year, has seen imports slump to $139million in 2012, while the country is presently on a self-sufficient path.
Cement consumption is a relatively accurate proxy indicator for economic growth as a stunning statistics show that China has used over 3 billion tonnes of cement in the past half a decade, more than what the United States used in the entire 20th century.
Although Africa’s cement consumption per capita falls far below the global average of 500kg per person, the continent has experienced sustained growth in cement demand, reflecting real GDP growth averaging 5% per year over the past decade.
In anticipation of the coming windfalls, following a demographic change that is expected to drive up cement demand over the coming decades, Dangote Cement commenced a pan-African investment across 16 countries in the continent, with the recent commissioning of its plant in Ndola, Zambia.
According to data from the African Development Bank (AfDB), the continent needs to invest around $100 billion a year over the next decade to meet its infrastructure shortfall, a third of which is needed for maintenance.
Considering the fact that Africa’s construction industry is fragmented and supply chains are inefficient, Dangote justified his investment choice of Zambia as one informed largely by the country’s unique socio-economic status with a high level of urbanisation that requires massive investments in infrastructure to keep up with the pace of growth and development. “Our choice of Zambia for this $400million investment is quite strategic.
With our new state-of-the-art integrated cement plant, with a capacity of 1.5million metric tonnes per annum, along with a 30 megawatts of coal-fired plant, we hope to bridge the cement supply gap in Zambia.
Though this is a significant milestone for us as a company, we are also excited by the fact that it is an African company that is spearheading this economic revolution in a sister African country.
This shows that Africa is gradually taking its destiny in its own hands rather than continue to wait for investors from outside the continent, as has been the case in the past.
We are strong advocates of ‘Africans investing in Africa,’ and we are for now, using the cement sector, which is a key indicator of the state of economic development on the continent, as our launch pad”, Dangote added.
On his part, the Zambian President said: “Since the ground breaking ceremony by the fourth republican President of Mr Rupiah Bwezani Banda.
What we are witnessing today is a clear demonstration of the confidence investors have in the Zambian economy. I am confident that the sustained economic growth has continued to score in the last ten years is a good sign that we are heading in the right direction “The investment promotion and protection agreement signed by the country between Dangote and the country since 2010 has been sustained.
I have no doubt that these new developments would make Masaiti District the new Obajana of Zambia. “The investment by Dangote would further gear the country’s infrastructural development.
The commissioning of a number of multi billion Kwacha projects has spurred domestic demand for cement. I am aware that this investment is the largest ever major investment into Zambia by a Nigerian company with an investment outlay of $400 million translating to 2 billion Kwacha.
My sincere hope is that with this project operating at its full capacity, we will see related industries mushrooming around this plant for forward and backward linkages.
This investment is expected to create at least 1000 direct and 6000 indirect jobs for Zambians. To create linkages, I hereby direct the Masaiti District Council to reserve land around Dangote Cement plant for us to create related industrial clusters whose purpose will be solely dependent on this timely project.
As government, we are aware that for years now, our people have been subjected to high monopolistic pricing structure for cement.
Today, I’m the happiest person to note that ever since the Dangote Cement Plant came onto the Zambian market, the price of cement has been gravitating towards the normal price.
This implies that the cost of construction is now becoming reasonable and affordable by majority of our people”. Vice President of Nigeria, Yemi Osinbajo however sued for protection of investors as part of measures to sustain foreign direct investment inflow.
According to him, respect for such laws remains a stimulus for encouraging long term investments in the continent. Osinbajo said: “With 54 countries and well over a billion people, an economic bloc cooperating through enabling trade agreements, collaborative tariff regimes, multilateral trade concessions and agreements will open up the fastest economy in the world. “Intra-African trade is low at the moment; our strongest ties are with Europe, America and now Asia.
We must challenge our policy intellectuals. The rule of law, protection of the right to private property and respect for the sanctity of contract are institutional pillars of liberal democracies that today guarantee an environment where commerce, industry and professional practice can thrive and bring much needed jobs to millions of our people.
An excellent example is Zambia’s Investment Promotion and Protection Agreement, which offer incentives and safeguard investments against any future changes in legislation. “This legislative device is forward looking and creative as it offers comfort and confidence especially to foreign businesses undertaking major investments”.