Why cement prices have risen sharply in Tanzania

Dar es Salaam. At a time when the government is calling upon manufacturers to bring costs of construction materials down, cement producers say they do not have their hand in the rise in prices.

This comes at a time when official data show that there was a slight fall in cement production last year - a drop that manufacturers say was directly linked to the global lockdowns due to the Covid-19 pandemic.

Data from the National Bureau of Statistics (NBS) show that domestic cement production dropped by 60,390 tonnes in 2021.

Tanzania produced 6.436 million tonnes of cement in 2021 compared to the6.496 million tonnes produced in 2020.

Manufacturers say the global lockdowns were only adding problems to a challenge of what they termed ‘high manufacturing costs’ that they have been contending with for some time now.

A key player in cement manufacturing told The Citizen yesterday that the fall in production points to the fact that manufacturers also had their share of the Covid-19 pandemic troubles, including the maintenance of industrial equipment and machines which became harder due to global lockdowns.

This became even more challenging for some of the industries that had machine breakdowns.

“Most industrial spare parts are imported, and due to the global trade restrictions, we were unable to ship them in, thus adversely affecting our production in the first quarters of 2020 and 2021,” he said.

However, he said, productions had picked up in the last quarter of 2021 after a number of global economies had officially reopened for production. Locally, manufacturers also believed it was about time they effectively grabbed a share of the government’s ongoing implementation of development projects, including part of the $576 million (Sh1.3 trillion) interest-free loan from the International Monetary Fund (IMF) which went into building vocational centres and classrooms across the country.

“In short, this is what partly explains the slowdown in supply, resulting in price rises in some cases,” the source said.

In their statement released yesterday through the Confederation of Tanzania Industries (CTI), cement producers say they have no hand in the reported price increases, insisting that they have continued to sell their products at ex-factory prices which have not been adjusted for years.

Despite the rise in the cost of production as a result of the price fluctuations on cost of fuel, transportation and the inflation spiral, producers have not changed their ex-factory prices - and that is exactly what they informed the government – through a January 31, 2022 meeting with the Minister for Investment, Industry and Trade, Dr Ashatu Kijaji.

“Most of the cement volume in the country is sold at an ex-factory price but transport costs have a significant impact on the landed price of the end product and fuel prices have increased worldwide,” CTI says.

It states that despite fuel prices rising by 45 percent during the past 18 months, the wholesale price of cement in the main consumption centres.

Manufacturers say they have enough capacity to deal with any spike in demand.

Currently, CTI says, the manufacturing capacity utilization was around 60 percent, suggesting that should demand rise abruptly, they have what it takes to fill the gap almost immediately.

“With the country’s new production capacities following the entrance of new manufacturers, any sudden demand spikes should be easily fulfilled,” the CTI statement read in part.

Earlier this month the government through the minister Dr Kijaji directed the manufacturers to maintain the market prices in the affordable levels and that measures would be taken against competitors who were colluding to bring prices up.

She also directed producers to set a good distribution system that will provide no room for unscrupulous traders to hike prices.

She also directed all regional trade officers to closely monitor price trends of various products in their respective areas and present reports to her ministry on the regular basis.