A few weeks ago, Rwanda’s sole cement producer, CIMERWA Ltd announced that it had made about Rwf4.5 billion francs in profit, a 24% margin, after several years of shifting difficult gears to find a profitable momentum.
Some observers had doubted the company would bounce back after succumbing miserable setbacks amid tight competition from regional players in the market.
A new team was set up, following rough views from President Paul Kagame wondering why the company was doing so badly despite government support at its disposal.
As the market expands with more than 900,000 tones expected to be consumed by end of 2020, the company’s CEO, Bheki Mthembu spoke to Taarifa, explaining how he turned the company around, the challenges he faced and how he intends to lay ground for continued growth before his contract expires soon.
Can you take us through the journey since you took over as CEO?
In 2017, CIMERWA Ltd made some profits, it is not the first time we made profits, but it was just on lower margins, and on low volumes. In 2018, we sunk deep because we invested US$3 million towards plant maintenance and upgrade. It was significant and it is in the context. It was the only reason that brought up these results which are so much surprising to others. This year, if you compare us to last year, we are 20% up on volume, 24% up on revenue. It is quite exceptional. What drove the numbers is just the expansion we did at the plant to gain more sales volumes. There were some headlines we had in 2017, which we had to solve. In 2018 we had interruptions to revamp the structure. It was prolonged because we had to fix quite a lot of things at the plant. Now we are seeing the results of the investments we made and the opportunities that we lost. We understand you also revised how you deal with local suppliers…
It is specifically developing and promoting local businesses. We have mobilized quite a lot on the logistics side of things; the in hauling of raw materials such as gypsum and coal, as well as transportation of products from the plant to the market. We use purely local transporters. It is significant, if you look at our input cost of production. Coal and gypsum have a significant contribution to high input cost of our finished cement product. Within the high landed cost of coal and gypsum transport is a major portion. We use local transport because in the past we could pay transport portion in the dollar denominated currency but now we pay in local currency. Apart from securing our critical raw materials in local currency, most critically, we have mobilize the local entrepreneurs to part-take in our logistics value chain.
What market segment caters for your largest supply targets?
Currently, our biggest consumer is the reserve force, government projects and a lot of clustered national distributors.
What are the biggest projects that consumed your cement?
The reserve force on IDP model village homes, the Kigali Sports Arena, the Afriprecast solution, the international airport, but not as significant as we expected. We believe their volumes will significantly increase in the future.
How much can you produce at the moment?
480,000 tons per annum.
What are the market demand dimensions?
As we speak, the national cement demand sits at around 750,000 tons per annum (tpa).
We invested on 600,000 (tpa) and unfortunately, the plant could not get to its design capacity of 600,000 (tpa) because of the raw material high moisture. To make cement you need limestone. In Rwanda, limestone is found in the south-western region. Our limestone deposit sits on the Mashyuza hot-water spring. Therefore as you mine it, it comes out with water, and that water is a huge problem for our process because we have to dry it. Typical limestone from a normal blast contains moisture levels of around 5-8%, where in our case, moisture can go up to 18-20%. The deeper you go into the mine, the more you get into the hot-water spring, and that is the challenge we are facing. It gets worse when it is raining, that’s why the technology that we will acquire going forward will have to be more efficient in limestone drying.
Regarding the issue of cement from Uganda, could your numbers have gone up because of Hima Cement exit from the market?
That is not true! We still have a lot of gaps in terms of cement capacity production in the country. Currently we are still importing cement from the Tanzanian suppliers, so there is still a substitute in terms of the gap that we are not reaching. Even today, if we were to produce all the 600,000 tons of cement, as per our design capacity, there wouldn’t be enough cement for our country that requires 750,000 tons per annum and by the end of next year, around 900,000 tons, and in 2021, it will be consuming more than 1 million tons. So, Rwanda is aggressively growing on its infrastructure delivery and we like the challenges, we have to wear our new thinking caps and roll up our sleeves to take advantage of this opportunity.