Africa’s Richest Man Faces Challenges In Tanzania; Shuts Down Cement Plant
By Mfonobong Nsehe
Africa’s richest man Aliko Dangote has shut down his cement plant in Tanzania due to high energy costs and a technical glitch at the $500 million factory, according to a government source, who confirmed reports in Tanzanian media.Executives at Dangote Industries Tanzania have recently complained about the government’s failure to provide the company with cheap fuel and other logistical solutions. Dangote Cement had previously requested the government-owned energy company, the Tanzania petroleum Development Corporation (TPDC), to supply its Mtwara-based cement plant with natural gas at significantly subsidized prices – a request the government body turned down.
Dangote cement spends as much as $4 million on diesel every month powering its cement factory.“Our plant uses six million liters of diesel per month to run generators after the promises to supply it with natural gas, which is produced in a nearby gas field, failed to materialize,” Dangote Tanzania CEO, Harpeet Duggal, had told a group of politicians in October. Dangote’s plant was strategically built in Mtwara, in Tanzania’s southeastern region, to take advantage of cheap natural gas that is extracted in nearby fields. While the previous government led by former President Jakaya Kikwete had promised Dangote cheaper prices for natural gas, the TPDC under the government of President John Magufuli has refused to honor the agreement.
In a bid to mitigate its energy costs, Dangote Industries has resorted to importing coal from South Africa, which is cheaper than natural gas – a move that has greatly upset top government officials in the Magufuli-led government, primarily because Tanzania also possesses substantial deposits of coal. In August, the government banned the importation of coal from South Africa – a move that pundits believe was specifically targeted at Dangote. The Tanzanian government has repeatedly requested that the cement behemoth source its coal locally, but Dangote executives have complained that the coal, which is mined from Songwe region, hundreds of kilometers away from Mtwara, is of poor quality and unreasonably expensive.
However, the acting commissioner of minerals in the Ministry of Energy and minerals, John Shija, has defended Tanzania’s coal as being better than imported coal both in terms of quality and price.“While coal produced in Tanzania is sold at $90 per ton with transportation costs included, coal from South Africa is sold at between $103 and $118 per ton – transportation costs included, “ Shija told a group of journalists on Thursday at a press conference in Dar es salaam on Wednesday.“We have banned the importation of coal to secure our local coal which is also better than the others in quality,” he said.
An official at Dangote Industries Tanzania who refused to be named because he has no authority to speak on the matter, says that by shutting down the plant, Dangote expects to coerce government officials to make good on the incentives the previous government promised the company last year.However, in a separate press conference on Wednesday, Tanzania’s Minister for Industry, Trade and Investment, Charles Mwijage, said that Dangote Cement is still enjoying the same incentives it was promised when the company was invited to invest in Tanzania.Addressing a press conference on Thursday, Mwijage said the new government under President John Magufuli didn’t do away with any of the investment incentives which were granted by former President Jakaya Kikwete’s government to Dangote.
“Of course, it is difficult to fulfill an investor’s wishes by 100 per cent… indeed many wish for more and more tax reliefs, but a law was passed to control tax incentives by the last regime in 2014,” the minister said.But a highly placed source at the Tanzanian Presidency confided in this reporter claims that Dangote Cement is caught up in political infighting – a crossfire between the previous and current administration.Under the Kikwete administration, senior officials at the Tanzania Investment Center (TIC) – the organization which promotes investment in Tanzania, gave Dangote some ridiculous tax holidays and a string of other unreasonable incentives.
President Magufuli has reason to believe that the TIC officials might have been compromised by Dangote and his top employees, and so the President has asked for some of those incentives to be scrapped. Magufuli was really upset when he learned of some of the privileges Dangote Cement was enjoying, and it is important to note that most of these incentives were not even constitutional. Since the President scrapped them, Dangote is upset and is now trying to sabotage the government by closing down the plant,” the source said.
In April this year, President Magufuli fired Juliet Kairuki, the Executive Director of the Tanzania Investment Center who is believed to have played a pivotal role in helping secure some of those incentives for Dangote Industries Tanzania. The office of the President never explicitly stated why President Magufuli fired her. A spokesperson for the Tanzania Investment Center declined to comment.Dangote Cement employs more than 10,000 people in Tanzania and the company claims to have a 22% market share in the East African country.
Dangote continues to face stiff competition from Twiga cement which is owned by Germany’s Heilderbergcement, and Tanga Cement – the two dominant cement producers in Tanzania.An email to the Head of Corporate Communications of Dangote Group requesting for a comment was unanswered as at the time of publishing this blog post.Aliko Dangote, founder of Dangote Cement, remains Africa’s richest man with a fortune estimated at $11.4 billion.