•Cement production over the past four years has dropped from 6.16 million tonnes of cement produced in 2016 to 5.37 million tonnes produced last year
•Cement companies have been grappling with dwindling sales but had to deal with rising operational costs and plummeting incomes over the years
The increasing number of stalled government projects has negatively impacted the country’s cement manufacturers.
This has been evidenced by the steady decline in cement production over the past four years, from 6.16 million tonnes of cement produced in 2016 to 5.37 million tonnes produced last year.
“The elections in 2017 had an impact on the sector, but for the last two years we saw a lot of big projects being frozen, stopped or even canceled,” Bamburi Cement chief executive Seddiq Hassani said yesterday.
The slowdown in demand has impacted local firms’ profits, throwing some of them into loss making.
One such firm was Athi River Mining Cement, which was suspended from trading at the Nairobi bourse after the firm was placed under administration during the last quarter of 2018.
Late last year, East Africa Portland Cement Company also announced it was laying off its entire workforce, highlighting the plight of the cement sector in the country.
This as cement companies not only grappled with dwindling sales but had to deal with rising operational costs and plummeting incomes over the years.
Last month, the International Monetary Fund announced that half of the 1,000 public projects being implemented in Kenya have stalled and will require a staggering Sh1 trillion to complete.
“The number of stalled projects is increasing, and is currently estimated at approximately 500 (half of all ongoing projects), because of non-payment to contractors, insufficient allocation of funds to projects, and litigation cases in court,” the IMF said in a fiscal transparency evaluation update on Kenya.
According to IMF, the rapid increase in public investment since 2010 occurred without enough screening for project viability and readiness before they entered the budget.
Some of the incomplete projects include roads, cancer facilities, dams, police stations, special economic zones and fruit processing factories, which all require cement consumption.
According to KNBS data, local cement consumption dropped from 5.79 million tonnes in 2016 to 5.37 million in 2017, before rising marginally to5.42 million tonnes in 2018. Last year, consumption was recorded at 5.33 million tonnes.
Since President Uhuru Kenyatta’s recent order to freeze new projects, plans have been underway to set up a special unit to monitor implementation of government projects to address the problem of incompletion.
This after Treasury CS Ukur Yatani revealed the government has been pumping billions into poorly planned and inflated projects, which are not realised or fail to give value for money.
“We are confident that in 2020 we will see an adverse change compared to what we have seen in the past few years,” Hassani said.
He added that this, together with scrapping of the rate cap law, would turn around cement-makers’ fortunes moving forward.
“We hope that in 2020, now that the interest rates cap law has been repealed, it will unleash the country’s full potential,” he said.