Undoubtedly, the most talked about issue in the built environment in 2014 is cement, with much made of its contribution to building collapse, pricing and the uneasy relationship among the big players in the industry.
The ‘war’ has taken many dimensions, with price being used as one of the weapons most commonly deployed.
The biggest player in the industry, Dangote Cement Plc, announced on November 2, 2014 that it had pegged the price of its 32.5 cement grade at N1,000 per 50kg bag, while it noted that the higher 42.5 grade would sell for N1,150 per bag.
The new prices, exclusive of the Value Added Tax, represent about 40 per cent discount on the prevailing market prices of the product, which was selling for N1,700 across the country, irrespective of the grade.
In announcing the price reduction, the Group Managing Director, Dangote Cement, Mr. Devakumar Edwin, said, “We recognise the need for a dramatic increase in the response to the huge infrastructure and housing deficit in the country, and one of the ways of addressing the issue is bringing the price of building materials down to much more affordable levels, especially cement, which is within our own control.
“This is part of our own contribution to the transformation agenda of the Goodluck Jonathan administration and the attainment of key milestones in the Millennium Development Goals.”
Responding to the move, BUA Cement Plc also announced a similar price reduction, while the second biggest operator, the Lafarge Group silently implemented a new price regime.
Price sensitive consumers were yet to adjust to the reduction when the operators, especially Dangote, silently raised the price to N1,745.
Though the company did not make a formal announcement of the price increase, officials explained that some variables in the economy had made it impossible to sell the product at the previously announced prices.
According to the officials, the recent devaluation of the naira by the Central Bank of Nigeria and the company’s inability to get gas to fire its plants have raised the cost of producing cement, adding that there was no way the company would bear the extra production cost alone.
They explained that the announcement made by the firm some months back that it was shifting to coal as an alternative energy source had not fully materialised, hence the anticipated price reduction had not happened.
As a result, the different cement brands are now selling for between N1,800 and N2,200 nationwide.
Before the price issue, a coalition of civil society groups and professional bodies in the construction industry had commenced a campaign for the standardisation of locally manufactured and imported cement, because of the belief that the product was responsible for the increasing incidences of building collapse in the country
In reaction, the Standards Organisation of Nigeria set up a technical committee of professionals to address the claims of the various stakeholders over the quality of cement in the market.
While the grade war raged, stakeholders in the building and construction industry bared their minds on the development, noting that there had not been any evidence to back the claim that the product was responsible for building collapse.
The President, Building Collapse Prevention Guild, Mr. Kunle Awobodu, who spoke with correspondents on the grade issue, said there was no proof that cement was responsible for structural failure, as both the 32.5 and 42.5 grades of the product could be used for similar and different purposes.
He said, “All the professionals in the built industry use cement and I must say that none can say it is responsible for building collapse; there is no scientific evidence on that. While the 32.5 can go for light and mass construction works, the 42.5 is usually for heavy construction.
“We have buildings that have been in existence for several years that were built with 32.5 cement, which is the lowest standard of the product in the country, and these buildings have been there for over 10 years. In fact, before this argument on standards, everyone was using 32.5; the 42.5 was only ordered specially for heavy projects.”
According to him, both grades are important but the problem in the past was that they were not properly labelled to aid identification by users, noting that there were different grades of cement including the 52.5, which is used in the United States; 42.5 used in places like China and Japan; and 32.5 that is in use in Nigeria and other countries.
The Director-General, SON, Dr. Joseph Odumodu, announced the restriction of the 32.5 grade of cement to just plastering, block moulding and light concrete work, while the 42.5 grade would be used for solid structures and heavy concretes, among others.
The SON sent a memorandum to the House of Representatives to investigate the composition and pigmentation of cement in the country.
The memo read in part “At the moment, two cement types are prevalent in the Nigerian market: 32.5 grade and 42.5 grade, with the former constituting about 50 per cent of the cement produced in Nigeria. Two years back, it accounted for over 85 per cent.
“The 32.5 grade is suitable for plastering, block-making and light concrete activities, while the 42.5 grade and above are for more solid structures and heavy concretes. Using 32.5 grade type of cement for works that require 42.5 type of cement would amount to inappropriate application.”
The House committee led by Mr. Yakubu Dogara, in its report, said there was a convergence of opinion at the public hearing it conducted that no substandard cement was being produced or imported into the country.
The committee said that the Council for the Regulation of Engineering in Nigeria had pointed out that SON neither had a technical laboratory nor competence to test the quality of cement being produced, packaged or imported into Nigeria just as it lacked the equipment for periodic monitoring of companies producing the product in the country.
The committee said it found out that the different cement grades in Nigeria were suitable for different purposes, stating that there was no scientific study that had empirically arrived at a conclusion linking any case of building collapse to substandard cement.
The committee, however, recommended that the 42.5mpa grade cement be used for standard construction works in the country.
Cement manufacturers in Egypt make the 42.5 grade for general construction, but the incidence of building collapse in the country is about the highest in the world.
“We recommend labelling of the product’s bags. That is where there is the need for sincerity of purpose among the manufacturers so that we can have objective clarification,” Awobodu stated.
There are several cement manufacturers in the country, including BUA and Ibeto, but Dangote Cement Plc is reputed to have the biggest installed capacity in the country, with Lafarge and its many subsidiaries as the second biggest.
Both companies have been in the middle of the ‘cement war’ with accusations of de-marketing each other.
According to available statistics, Dangote Cement Plc is a fully integrated company that has operations in Nigeria and 14 other African countries, with current total production capacity of 20. 25 million metric tonnes per annum from its three existing cement plants in the country – Obajana, Ibese and Gboko – with 10.25 million MT, 6.0 MT and 4.0 MT capacities, respectively.
The Obajana Cement Plant in Kogi State is reputed to be one of the single largest in the world, while a fourth line, which will add 3.0 million MT to the existing capacity, is expected to bring the total capacity to 13.25 million MT by 2015.
Dangote Cement is also the biggest quoted company in West Africa and the only Nigerian company on the Forbes Global 2000 Companies with operations in Benin, Ghana, Congo, Tanzania, Senegal, South Africa and Zambia, and greenfield projects in Zambia, Senegal and other African countries, which are expected to have capacities for 1.5 million MT each per annum.
The Group also owns six cement import terminals in Lagos and Port Harcourt, and one in Ghana through which it imports and bags bulk cement and targets a strong pan-African presence.
Lafarge Nigeria, on the other hand, is a member of the Lafarge Group created in 1833, with headquarters in France and reputed as the world leader in building materials, number one in cement production worldwide, number two in aggregates and concrete, and number three in gypsum.
In Nigeria, the Lafarge Group has subsidiaries, including Atlas Cement Company Limited, in Rivers State; Ashaka Cement in Gombe State; UNICEM, which is based in Calabar, Cross River State, in addition to the Lafarge Cement WAPCO Nigeria Plc plants in Ewekoro and Sagamu, both in Ogun State.
The subsidiaries have installed capacities of 0.5 million MT, 1.0 million MT, 2.5 million MT and 4.5 million MT respectively, while Lafarge WAPCO, with 60 per cent equity shares owned by the Lafarge Group, recently became Lafarge Africa, a Nigerian listed holding company that will consolidate all the group’s Nigerian and South African assets in a transaction worth $200m.
While speaking on the merger, Guillaume Roux, who has been appointed the Chief Executive Officer of Lafarge Africa Plc, said, “The creation of Lafarge Africa allows the company to continue in its drive to be the best in the areas in which it operates. The broader geographic coverage means that Lafarge Africa will be better positioned to serve its customers more widely. It also places the company in a stronger position to be able to benefit from the economic growth and development opportunities available in both Nigeria and South Africa.”
Lafarge Africa is expected to have a combined production capacity of around 12 million MT made up of Lafarge WAPCO, with its 4.5 million MT, and Lafarge South Africa Holdings, with its 3.6 million MT, and an expected expansion in 2017 that will raise the installed capacity to 17 million MT.
While Dangote has been aggressive in its expansion plan by expanding its production lines and building new plants in different parts of Africa, Lafarge Africa Plc is also consolidating its position in the country by taking full control of the ownership of its subsidiary companies.
It recently got the approval from the Securities and Exchange Commission to acquire the minority shares of Ashaka Cement of 927 million, which represent 41.39 per cent of the company’s equity, thereby giving Lafarge Africa 100 per cent stake.
While Flour Mills of Nigeria Plc also recently sold 30 per cent minority equity investment in UNICEM to Lafarge Africa Plc.
According to reports, the transaction, comprising the sale of shares and the repayment of loans is structured in two tranches, with first tranche payable during first quarter of 2015 and the second in the first quarter of 2016.
Beside producing popular brands like Elephant Cement and Supaset Cement, among others, Lafarge, which is about to complete its merger with the second biggest cement manufacturer in the world, Switzerland’s Holcim, is quick to emphasise its strong presence in Nigeria over the years by claiming that its classic cement was used to build the longest bridge in Africa, the Third Mainland Bridge in Lagos, and that its building solutions are helping to build better cities worldwide.
In finding a way forward in this battle for dominance, engineers and artisans have a say. “There is no need for any war between the manufacturers, they should fight to maintain quality and stabilise price,” Eke said.
Jaiyesimi said the government should provide a level playing ground where manufacturers would have reasons to engage in healthy competition.
He added, “It is unfortunate that our government is not taking the issue of cement seriously. A lot of things go into manufacturing, including power, road infrastructure and transportation. Every manufacturer has its power plant, which should not be; these things should be in place before we talk about pricing; if not, every manufacturer will look for one way or the other to play out the other.
“Government has no business being in business, but it has the responsibility to create a level playing ground for everyone to operate. Let the government play its role then we can start talking from there.”
This feature story originally appeared in Punch News