Majority shareholder PPC Group could buy Rwanda stake in Cimerwa

Tuesday June 25 2019

cimerwa

A total of 49 per cent shares in Cimerwa are up for sale. PHOTO | FILE | NATION MEDIA GROUP 

MOSES K. GAHIGI
By MOSES K. GAHIGI
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outh Africa’s Pretoria Portland Cement (PPC) Group, the majority shareholder in Cimerwa cement company, is considering buying the Rwanda government’s stake in the firm.

Cimerwa, under pressure from President Paul Kagame to sell the government stake, put the shares on the market this past week.

Minister of Trade and Industry Soraya Hakuziyaremye on Monday announced the sale. She said discussions are ongoing with shareholders to determine who is willing to buy the stake.

“If they are not willing to buy them we intend to look for a private investor to take over the shares,” she said.

The government has set July 5 as the deadline for interested investors to bid for its stake.

The government has a 16.54 per cent stake in the cement maker, while PPC has 51 per cent. Other shareholders are the Rwanda Social Security Board, which has 7,115,303 shares (20.24 per cent), Rwanda Investment Group with 4,027,530 shares (11.45 per cent), and Sonarwa Group with 268,502 shares (0.76 per cent).

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The entire 49 per cent stake is up for sale.

Cimerwa chief executive Bheki Mthembu said that PPC Group is doing a share valuation and will communicate its position in due course.

“We see the government focusing on levelling the playing field and opening up the market for more players, hence the need to stay neutral in the cement manufacturing sector — which will encourage more interest in the sector and spur growth,” said Mr Mthembu.

In March, President Kagame said he had lost patience with Cimerwa which had failed to produce enough cement for the domestic market, making it more expensive than imports from the region.

“Cimerwa can’t produce enough cement, and it’s very expensive. Yet the government maintains its shares there. They think we can stop cheaper cement from coming in so that they can sell?” President Kagame asked.

Prime Minister Edouard Ngirente said the government had given PPC up to the end of the month to decide on whether it would buy its stake, after which the shares will be floated to the public.

Although Cimerwa has failed to meet domestic demand for cement despite increased investment in the firm, its lacklustre production came into the limelight when the market suffered a shortage after the Rwanda-Uganda border closure in late February.

Cimerwa has continued to operate below its production capacity of 600,000 tonnes. In 2018, it produced only 364,864 tonnes of cement — less than 60 per cent of the total demand. Rwanda was forced to import more than 318,800 tonnes of cement to meet the demand of 640,455 tonnes.

When PPC bought the majority stake in Cimerwa in 2012, the firm hoped to turn its fortunes around, but this has not happened, yet cement demand has kept growing over the years, largely due to growth in the construction sector. Big projects like the Bugesera Airport and construction of secondary cities have raised the demand for cement in recent times.

In 2013, the local demand stood at 493,587 tonnes.

Cimerwa prices have also remained high, and imports from the region from the likes of Hima Cement and Tororo Cement from Uganda as well as Twiga and Simba from Tanzania which are cheaper and offer higher volumes, have progressively eaten into the cement maker’s market share.

Cimerwa cement currently sells at Rwf9,800 ($10.83) a bag, compared with Rwf9,200 ($10.17) for the Twiga and Dangote brands.

Cimerwa, which was commissioned in 2015, says that it has limited capacity for drying limestone, which has high moisture content from the hot water springs near the mine. According to the firm, phase one of a “debottlenecking” exercise has helped to boost capacity to above 80 per cent from 65 per cent. The company hopes that Phase II which starts this year, will help the firm reach full capacity by the end of 2020.

Prime Cement, a plant under construction in Musanze in northern Rwanda, is expected to boost domestic efforts to meet local demand.

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