Some cement manufacturers in the country have lodged complaint with the Common Market of Eastern and South Africa (Comesa) Competition Commission (CCC) against cheaper Dangote Cement which is flooding the local market from Zambia.
In an interview on Tuesday, CCC head of mergers and acquisitions Willard Mwemba confirmed receiving a complaint from Malawi cement manufacturers, but refused to disclose the names of the companies complaining.
However, he said investigations on the matter are underway.
“The issue comes in if the company is so big and engages in predatory pricing, which we call undercutting,” he explained.
“Undercutting can only be prohibited if the product is sold below its cost of production. But sometimes companies sell at a loss to drive out their competitors and raise the prices later to recover the losses which is a risky move,” said Mwemba.
He said preliminary investigations which are subject to change depending on the findings show that Dangote is a low cost producer which is encouraged in competition.
“Even in Zambia, Dangote is a low cost producer as compared to other cement producers. This is because it has its own power plant, uses its own distribution trucks to Chipata at a subsidised cost and has few permanent employees, among others,” he said.
Mwenda said Malawi is the only country that has complained to the competition commission against Dangote’s cement. Dangote also exports to Zimbabwe and the Democratic Republic of Congo (DRC).
Malawi’s Competition and Fair Trade Commission (CFTC) executive director Wezi Malonda said the companies initially lodged a complaint with the commission which referred the matter to CCC.
“Since it involves more than one Comesa member State, we referred the complaint to Comesa Competition Commission who are conducting an investigation on the matter,” said Malonda.
Billionaire Aliko Dangote’s cement from his Zambia plant has been out-pricing Malawi-produced cement, since last year.
Spot checks show that a 50-kilogramme bag of high powered 42.5-grade of Dangote’s cement is going at K6 200 in some outlets while a 32.5 low grade which is locally produced is selling at about K6 600.
That means saving K4 000 for every 10 bags one buys, which some consumers say is a “huge” cutback when it comes to construction costs. As such, consumers are opting for the Dangote‘s high powered cement than the locally produced product.
Between February and March last year, seven companies and businesses have been given cement import licences by the Ministry of Industry, Trade and Tourism to import 80 000 tonnes of cement a year into the country, which is equivalent to about 25 percent of Malawi’s cement demand at around 375 000 tonnes.
But local cement producers have since cried foul, saying allowing imported cement from Ndola’s Dangote plant in Zambia-which has an annual production capacity of 1.5 million metric tonnes-could hurt the local cement industry and hit jobs hard.
They seek government’s protection and the Comesa Competition Commission to intervene.
Speaking on condition of anonymity, an official from Shayona Cement Corporation that has a cement producing plant in Kasungu on Tuesday said the company imports clinker from Zambia and coal from Mozambique, which puts them at a disadvantage to Dangote’s cement.
He said Dangote is the only major competitor producing high powered cement at low cost, warning, “with these imports, there might be some job cuts.”
Shayona Cement Corporation started its operations in the country in 1997 and employs over 1 000 people.
Last year, Cement Products Limited (CPL) chairperson Aslam Gaffer, also lamented the influx of imported cement. In an interview, with our sister paper The Nation he said despite efforts by the local cement manufacturers to compete on the market, the influx of cheap cement has been affecting them because they cannot compete fairly due to high cost of production, which increases input costs.
“We are operating far less beyond capacity in all our three plants because of the influx of dumped cement on the market. They have oversupplied the Zambia market because of the coming in of Dangote Cement on their market and they are extending it to Malawi.
“Prior to that, the price of cement was between $9 [K6 570] and $10 [K7 300], but when he [Dangote] came on the market, the prices dropped to $5 [K3 650] at wholesale. In any production line, the most expensive thing is logistics, but we find that Dangote Cement is selling at $5 a bag in Malawi just as in Zambia, which is stiffling, our business,” he said.
LafargeHolcim Malawi chairperson Symon Msefula in May last year also said while they welcome competition, livelihoods and the future of more than 5 000 households that depend on the company are threatened due to imports that have created an uneven playing field.
That figure includes 15 transporters, 58 active distributors and 91 employees, according to Msefula.
Southern African Development Community (Sadc) and Comesa rules are unclear on how to regulate such price differentials even as they promote free trade.
In one breath, Article 25 of the Sadc Trade Protocol (STP) states that member States shall implement measures within the community that prohibit unfair business practices.
In the other, it states that member States should promote competition and also provide a framework of trade cooperation based on equity, fair competition and mutual benefit.
On the other hand, Article 51 of Comesa Treaty states that member States recognise that dumping, by which products of a member State are introduced into the commerce of another member State at less than the normal value of the products, be prohibited if it causes or threatens material injury to an established industry in the territory of the other member State or materially retards the establishment of a domestic industry.
The contentious phrase here is “less than the normal value of the products” as determining what the normal value is could be tricky. Indeed, it remains unclear whether the importation of Dangote cement could constitute dumping.
In an interview on Tuesday Consumer Association of Malawi (Cama) executive director John Kapito said consumers have the right to buy the product of their choice.
He said consumers are going for a good priced quality product.
Malawi Confederation of the Chamber of Commerce and Industry (MCCCI) president Karl Chokhotho in an interview earlier said the private sector lobby group would have problems if the cement is smuggled into the country. n