Dangote’s strategic plan to dominate African cement market

Dangote’s strategic plan to dominate African cement market

The Dangote Cement Plc bid for PPC, South Africa largest cement maker, Analysts believe, is a way to increase its visibility in Southern African Development Community Market.

 

But the plan could even mean much more, for Africa cement market. If the deal is sealed, the face of not just cement business in South Africa but also that of Africa is about to change and again show Aliko Dangote is Africa’s smartest businessman.

 

French company,  Lafarge Cement,  a subsidiary of LafargeHolcim is currently the largest producer in Africa, with over 50-million tonnes a year of cement capacity.

 

With the expected infrastructure boom in Africa by 2020, the richest man in Africa seemed to have realized this himself  and his bid to take over PPC, will no doubt make DCP a dominant player

 

PPC is currently the largest cement producer supplier of cement in southern Africa with eight manufacturing facilities and three milling depots in South Africa, Botswana, and Zimbabwe.  These facilities are capable of producing more than seven million tons.

 

Dangote already has 65%  stake in Sephaku already, and it is the fourth largest cement producer in South Africa, with an annual capacity of about 2.3 million tonnes.

 

If Dangote succeeds in buying PPC , the merged company would have a combined cement capacity of more than 57 million tonnes a year and give Dangote a majority of the Southern, Western and Eastern African market.

Also, Dangote Cement Plc is present in almost all the regions in Africa, that are rich in limestone deposits, an essential raw material for the production of cement.

 

Africa which used to be something of a treasure trove, with one of the highest prices for cement has changed over the last five years. Although unprecedented capacity growth has disrupted the supply side, we cannot take it away that Dangote cement has been a key figure in the crash of the market price in all the markets it is located.

 

Just recently, Nigeria announced it had reached self-sufficiency in cement production – a remarkable feat, given that it was not long ago that Nigeria was one of the world’s largest importers of cement. In 2011, for example, the country imported 5.1 million of the building material.

 

The crashing prices

East Africa region witness a crash in cement prices last year. The average retail price of a 50kg bag of Dangote cement in Kenya is $4.70(N1,694), which is a significant drop from an average $7.40(N2,667.70) as at the end of last year.

 

In Tanzania, a 50kg bag of Dangote cement is selling for $4.50(N1,622.25), which is a 20 percent drop from the average $5.85(2,108). In Uganda, the average price was $8.8(N3,172) as at the end of last year.

 

In the words of Sada Ladan-Baki, group executive director of Dangote Cement “The price reduction is in line with our commitment to help in the development of infrastructure and boost efforts to reduce the housing deficit in Africa”

 

Currently Dangote Cement has operations in about 14 African countries, and boost ownership of the largest in Sub-Saharan Africa with 10.25mmtpa capacity across three lines and a further 3mmtpa capacity currently being built, however, the company lags behind on Lafarge production capacity and continental reach.

 

So when Dangote confirmed to the Nigerian Stock Exchange that it has officially contacted the board of directors in PPC  with respect to the acquisition of the entire share capital of PPC the news is bound to unsettle large cement players although talks are in the preliminary stage.

 

Trust Dangote not to give up without showing he is the boss.

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