Mozambique’s Ministry of Economy has announced the removal of protection for the cement industry, which will be reduced by 20 per cent, as part of a strategy to increase the sector’s competitiveness and thus reduce product prices. The decision aims to stimulate competition, taking into account the growth in the number of plants and the increase in production capacity in the country, the Agência de Informação de Moçambique reported this Sunday, 23 March .
According to the agency, the protection was initially established to guarantee investment in the sector, especially in relation to Dugongo, the only producer of raw materials for cement in the country. When the protection was implemented, Mozambique had just four plants with a production capacity of 400,000 tonnes of cement. Today, the country has almost ten plants with a capacity of 16 million tonnes.
According to Sidónio dos Santos, national director of Industry, the protection measure was crucial for the initial development of the industry, but now the government believes it is time to open up the market to allow greater competition and improve product quality, while at the same time promoting price reductions.
‘Investments needed to take place in a protected environment and, at the moment, we have Dugongo as the only company producing raw materials. And we knew that when we protected, there would be cartels or monopolies. We believe that the day we remove the protection, then we will better understand the cost dynamics because other types of players will enter the market,’ said Sidónio dos Santos.
The director recognised that the protection of Dugongo ended up reducing competition in the market and therefore believes that opening up the sector will be the key to understanding the true state of the industry, considering that, at regional level, investments of more than 100 million dollars are underway to increase cement production.
Another point he emphasised was the evolution of the market in terms of imports. ‘When we didn’t have this protection, cement came from China, Pakistan and other countries. But now there is no more imported cement on the market,’ he emphasised.
With regard to expanding production, it was confirmed that in the north of the country, specifically in Nampula province, a new investment is in the experimental phase and should help to meet local demand. The same situation is occurring in the centre of the country, which reinforces confidence in the increase in national production.
As well as liberalising the market, the government is also analysing the situation of companies that produce both cement and raw materials, to avoid possible conflicts of interest, since other plants need to buy raw materials locally in order to produce and distribute cement.
‘As far as competition is concerned, we have to adjust the regulations to safeguard these aspects and allow for a healthy business environment in the sector,’ explained the national director.
In addition, the government is investigating alleged practices of selling Dugongo cement at lower prices in South Africa compared to prices in the country. When Dugongo entered the national market, it allegedly used a strategy of low prices, which resulted in the closure of several competing companies, which is now being investigated.
‘Let us work on the situation. We are investigating. Dugongo started operating in this market, offered competitive prices, there was a petition and some companies closed because of Dugongo’s impact,’ said Sidónio dos Santos.
The cement market in the country is currently going through a troubled period, made worse by the recent intervention of Venâncio Mondlane, a former presidential candidate, who, as part of his supposed parallel government, decreed that the price of cement should be set below 350 meticals (around 5.5 dollars), a decision that has caused confusion for both producers and resellers, who are forced to sell at prices below the cost of acquisition.
Faced with the situation, the government has undertaken to analyse the cement price structure in order to find viable solutions that promote stability and competitiveness in the sector, while trying to minimise the negative impacts on the industry and consumers.
The government believes that by reducing protection and improving competitiveness, the price of cement should naturally fall, benefiting the Mozambican economy and consumers in the medium and long term.
