OPPORTUNITIES AND CHALENGES OF CEMENT MARKETING IN ETHIOPIA

Abstract

The study is intended to examine the Ethiopian cement industry, identified the challenges facing the cement industry in Ethiopia and opportunities for development of the sector and forward recommendations for improvement. In light of the above general objective, descriptive survey method has been adopted wherein both primary and secondary data have been gathered. Primary data was gathered through interviews held with 10 officials of systematically selected 3 cement producers and 6 institutional buyers and housing agency and the Ministry of Construction and Urban development. The sample size of 3 cement producers from the total population of 11 is found to be sufficient for the purpose of the study. On the other hand the annual Statistical Abstract of the FDRE, Surveys, related researches and other resources from the Ministry of Construction and Urban Development and Ministry of Industry of the FDRE as well as different bulletins, statistical reports and reference books has been consulted for secondary data. Then the data has been analysed and interpreted through statistical measures such as averages, percentages and trends. The study found out that the cement market in Ethiopia has been growing since the liberalization of the economy owning to the growth of the country’s economy and the development of the construction sector that boost demand for cement. The sector is characterized by good capacity utilization of cement plants, currently above 60% as compared to other parts of Africa and emergence of new players attracted by the huge supply shortfall, which is estimated at more than two million tonnes per year. Government policies and strategies favourable to the development of the sector include the policy of protecting local cement producers from foreign suppliers, the five years Growth and Transformation plan (GTP) and wide range of incentives provided for investors like income tax holidays and remittance of fund. The Government’s commitment towards developing the country’s power generating capacity are also identified as prospects to further assured the sector’s potential for growth. The study also identified challenges for the cement sector in Ethiopia such as lengthy procedures at government offices, poor coordination among government agencies offices that in sum have adverse effects on big investors, especially foreign ones. Other challenges identified include dependence on electric power and limited use of coal as source of energy mainly due to its fluctuating price; lack of rail way facility for transportation of cement; absence of clear vii regulations and mandatory standards for environmental protection; investors’ limited access to bank finance mainly due to frequent freezes in lending capacity of banks. In order to mitigate these challenges the study forwarded some recommendations for the government, which include among others: incentives for investment in coal mining to encourage local production of coal; construction of railways; and improving the lengthy and bureaucratic procedures in government offices and devising a mechanism to improve bank financing to investors. Government and business comunity should also enact regulations and mandatory standards pertaining to environmental protection and create awareness among the business community. The studyalso forwarded recommendations for cement producers and investors such as improving operational efficiency to cuts costs of energy costs and enhances health and safety of workers; enhance the market potential in reaching rural population through introducing cement made houses and distribute cement at a reasonable price.