Did Cemtech dupe the government?

POKOT, KENYA

The establishment of a cement plant in Pokot, which would have seen the Government reap millions in revenues, has failed to take off.

Three years after Cemtech Ltd, which passed itself as the subsidiary of India’s largest cement producer, Sanghi Group, won the tender to exploit the limestone deposits in the area, there has been little development.

Sources at the Ministry of Industrialisation say the slug in the setting up of “ultra-modern” cement plant in the cattle rustling-infested area has been brought about by technical reasons. “It seems the tender was wrongly awarded to Cemtech Ltd,” said someone at the ministry who did not want to be named.

“The firm seems not to have an office nor even the capital necessary to kick-start the multi-billion project.” Indeed, this has resulted to bitter exchanges between the government and leaders from the Pokot region, who claim the region’s key resource was auctioned to “brokers.”

The limestone deposits have in the past generated controversy that resulted in the government kicking out Tororo-based Kavee Quarries Ltd. The firm, which set base in the area in 1997, had not put up a cement factory but was transporting limestone to be processed 300km away at a plant owned by Tororo Cement Ltd.

This was contrary to the initial mining agreement, which had stated that the firm would set up a plant in Ortum, a year after commencing operations. “Kavee Quarries requested the government to allow it to continue transporting the extracted limestone from Ortum to Uganda for cement processing claiming lack of electricity and poor infrastructure in the area.

It even requested a three-year extension to iron out the so-called infrastructural problems before the factory could be set up. However, this was never seen. That’s why we kicked them out of Pokot,” said Prof John Lonyangapuo, the former Industrialisation Permanent Secretary.

But even after Kavee’s exit, the semi-arid Pokot is yet to benefit from the huge limestone deposits. Cemtech Ltd, which won the tender in 2009, has been moving at a snail’s pace, with only bush clearing done on site, three years after it set base in Sebit. Pokot County Council chairman David Moiben has already expressed concern over the delay.

“We are only told that the construction would start soon but we don’t know the exact date,” Mr Moiben said.

The delay means Kenyans will have to wait a little longer for the needed competition to bring cement prices down. In its initial plan, the firm had indicated that the plant would be running from 2011. The firm was granted exclusive limestone mining rights in Pokot County where over 1.2 million tonnes of cement will be produced annually.

Cemtech had proposed to produce over 600,000 tonnes per annum and expand to over one million in the subsequent phases. As more cement players join East Africa, the influx of cheap imports mainly from Egypt remains a big challenge to them.

Recently, the association of cement producers in East Africa called on the government to restore the suspended duty on cement to shield them from unfair competition. A number of firms in the region, mainly in Tanzania, have already suspended operations, citing increased cheap imports.

The East Africa Cement Producers Association has warned that the cement manufacturing sector in East Africa is faced with closures and job losses as a result of the increased dumping following the failure by the East African States to take into consideration their recommendations in the budgets to level the playing field.

The Association had asked the governments to reinstate cement to the sensitive product status, which would restore the Common External Tariff to 35% or $50 per tonne whichever is higher.

This article has been published in the August edition of the Nairobi Business Monthly.