Why is Cost of Cement Still Rising? As Dangote Cement Makes N121.8 Billion in Six Months
Dangote Cement PLC, Africa’s biggest producer of the building material cement, recently posted a profit- after- tax (PAT) of N121.808 billion in the six-month period ended June 30, 2015, indicating a 21.65 per cent increase over the N95.440 billion announced for the same period of 2014. It is encouraging to see an African owned enterprise managed so well as to be making good returns so long as such enterprise runs a clean business devoid of corruption and impropriety. It would be refreshing to see returns from other sources besides government coffers.
Yet, there are lingering questions that must boldly be asked and sincerely answered if we truly want to address the economic challenges facing Africa today especially in making progress in the effort to reduce the housing deficit in Africa affecting nearly 20 million people in Nigeria alone. Why are cement prices rising despite the purported announcements by Dangote Cement touting that cement prices have been slashed? Is it a case of misleading the public or are there other limiting factors in play?
While there is substantial coverage of the financial success of Dangote Cement and the launching of more cement plants across Africa very few seem to be reported about the fact that true market prices are not reflecting the purported slashes. Aliko Dangote’s purported bid to buy the English soccer team Arsenal, seems to have generated more attention.
In recent times, Dangote Cement has gone on the record to promise and announce the slashing of cement prices especially Nigeria where it had said that its cement would be sold at N1,000.00. That has not been the case. Instead the price of cement has been on the increase to as much as N2000.00 a bag even as the company reports astronomical profits coupled with opening more plants across Africa.
It is worrisome that a different reality plays out in practice with cement prices as it affects cement distributors and end users. The frustration of distributors and end users of cement is exemplified in this report by Daily Independent:
An angry distributor, who spoke on the condition of anonymity, said though the firm had previously announced the crash of the 32.5 cement grade to N1,000 per bag, and the higher 42.5 grade to N1,150 from N1,700 irrespective of the grade, the distributors never got it at the announced prices. The distributor called on the firm to also announce the latest increase, adding that the former announcement of a crash in price was “highly counter-productive to the marketers.” The distributor said: “When the company reduced the price to N1, 000, they were very quick to go to the press to announce it even though they were not even selling at N1, 000 to us the distributors. They were selling it at N1, 150. But in a week they had increased it to N1, 745 for the distributors. “Why can’t they go back to the press to announce the increase?"
It is more concerning as we are yet to see the effect the change in foreign exchange handling policies by the Buhari administration would have on cement production in Nigeria since the company heavily relies on imported materials for its production. The average African end user seems to catch no break even as the big companies make huge returns. Donating millions in relief aid or programs may not be ideal if such millions have been made directly or indirectly from the disadvantage or suffering of the average African in the first place.
This editorial urges leaders and big company owners to truly cater to basic needs of the average African from the root in a way that would help the average African build and stand on his own.
The component of cost of energy in the production cost of cement is prominently high. With depleting energy sources and rising energy costs , it is essential for every cement manufacturer to continuously put in efforts to reduce the energy consumption in the manufacturing of cement .