Zimbabweans can now freely import cement, the government says, a response to a doubling of prices caused by surging demand and depressed local production.
Cement prices are rising on the informal market due to a combination of factors; plant breakdowns and scheduled maintenance at the country’s major cement producers plus the expiry of import licences. All this has happened at a time of record high demand.
“The nation is advised that following reports of artificial cement shortage in the market and the spiralling prices Cabinet has approved the importation of cement by individuals and companies with free funds,” Cabinet said Tuesday.
Until December, each individual and company can import a maximum of five tonnes of cement.
Cement producers for years lobbied the government to limit imports, saying they could not compete with cheaper imports given the high cost of production at home. In 2021, the government gazetted Statutory Instrument 89 of 2021, which restricted foreign cement by issuing import licences. Many of these licences have since expired and the government had been reluctant to renew them, causing a shortage.
The high prices threaten to stall public infrastructure projects and house construction, which have driven a construction boom and helped prop up sections of the economy.
Due to government infrastructure projects and home builders, cement consumption has been rising over recent years. Cement consumption increased from below one million tonnes in 2017 to around 1.6 million tonnes this year, according to estimates by PPC, the country’s biggest producer.
In total, cement companies have a capacity of 2.6 million tonnes of cement, which should meet current demand. However, production costs and plant breakdowns are keeping them from producing enough cement.
PPC’s cement sales grew by 42% in the first five months of this year, as the company recovered from a plant maintenance shutdown last year.
Who rules the market?
PPC has a capacity of 1.4 million tonnes of cement per year at its locations in Harare and Bulawayo, and controls just over 60% of the market, according to industry estimates.
Khaya Cement, the country’s second biggest producer, currently accounts for around 16%. In February, the company said it planned to double annual output to almost 500,000 tonnes by year-end. However,
The company commissioned a new 1 million tonnes-per-year capacity plant last year, part of a US$25 million investment. But the plant is yet to deliver fully. Khaya’s kiln, which produces the clinker raw material used to make cement, has constantly broken down while there are concerns over limestone supplies.
Khaya is still recovering from a roof collapse in 2019 that stopped production for months, and produced 19% less cement last year. The company says it also “witnessed increased costs as a result of increased third-party and plant maintenance costs”.
Another producer, Sino Cement, is reportedly currently under routine maintenance. It has capacity of 200,000 tonnes.
Why cement costs more in Zimbabwe
Zimbabwe’s cement companies are opposed to imports, saying they hurt their businesses which face higher costs.
“The influx of cheap imported cement posed a serious threat to the domestic industry which has enough capacity to meet national demand. Constructive engagement continued with the regulatory authorities in an endeavour to obtain the required support,” Khaya says in its 2022 financials.
PPC has also called for a ban on imports to protect local industry.
Cement now costs more than double what it sells for in neighbouring countries. According to cement companies, this is because production costs are higher in Zimbabwe.
In 2021, when President Mnangagwa toured the company’s new plant, executives laid out for him the costs they face. Power is 30% of costs, coal in Zimbabwe at the time cost US$42 per tonne versus US$30 tonne in South Africa and Botswana. Rail was US7c per kilometre per tonne versus 1.79c in South Africa and 3.92c in Zambia. Road transport was almost double the cost in South Africa, they said.
Power is also a major cost for cement producers. PPC has said power outages account for 20% of plant stoppages. The company expects to commission a 30MW solar plant in 2024 to feed its Colleen Bawn and Bulawayo operations.