The Rwandan government is in the final stages of selling its 49 per cent stake in the country’s biggest cement maker, Cimerwa.
While addressing a leadership retreat last month, President Paul Kagame wondered why government continues to hold shares in the company that is struggling to stay afloat.
In 2012, Pretoria Portland Cement (PPC) bought a majority stake in Cimerwa, taking up 51 per cent shareholding, with the government retaining 49 per cent.
“Cimerwa can’t produce enough cement, and they are very expensive. Yet government maintains its shares there. They think we can stop cheaper cement from coming in so that they can sell?” Kagame wondered.
When he asked about the progress of the sale of government shares, Prime Minister Edouard Ngirente revealed that PPC had been given a deadline to decide whether they were buying out government or otherwise government would go ahead and float the shares to the public.
Despite being in existence for more than 30 years, Cimerwa has struggled to cement its position in the market, but imports from Uganda and Tanzania eating into its marke share.
Demand for cement has been growing by over 20% in the last five years.
South Africa’s PPC Ltd, took over CIMERWA majority stake in December 2012 for US$61m. At the time, Cimerwa had production capacity of 100,000 tonnes of cement per annum but demand in Rwanda was 350,000 tonnes.
PPC said expansion would be done to raise production capacity to 600,000 tonnes per annum.
Today, Cimerwa can only produce 400,000tonnes, far below the local demand.
According to PPC, the strategy to expand into the rest of Africa has started to bear fruit, despite continuing challenges in many of the African markets in which it established plants.
Johan Claassen, the chief executive of PPC, said that the group’s diversified portfolio had enabled the company to offset the weaker South African performance with robust growth in its rest of Africa segment.
“Despite the difficult trading conditions, average cement prices in the Southern Africa region last marginally increased.
The government withdrawal from the firm is among other things, based on its inability to meet domestic demand for cement at competitive prices compared to imports.
Despite government backing, the firm has been citing losses in its business operations.
With construction among the fastest growing sectors, domestic demand for cement is growing rapidly hence the need for more supplies.
Data from Rwanda Revenue Authority in 2017 showed that at least 79,573 tonnes of cement was imported from Tanzania while an additional 164,814 tonnes were imported from Uganda.
In 2018, the construction sector grappled with a shortage of cement supplies for over a month, causing price hikes of up to nearly 50 per cent.
This is after the cement producer cited a temporary shutdown of its Rusizi plant.
The plant also has not been able to meet its full capacity of 600,000 tonnes of cement per year, sustaining shortfall of 100,000 tonnes annually.
PPC’s latest annual report admitted to challenges in 2018 noting that result revenues and profits dipped citing cost high costs of maintenance and production during the shutdown period.