LAST week we embarked on this two-article series which is looking at the Ministry of Commerce, Trade and Industry manufacturing sector report of 2011 to 2012.
We considered the constraints to the manufacturing sector but today we want to highlight one of the successful stories of the manufacturing companies.
Dangote Cement has managed to overcome most limitations that face the sector and consequently set itself on a growth path.
The advent of Dangote Cement on the cement manufacturing scene has added an additional manufacturing capacity of 1.5 million tonnes to the 66 per cent manufacturing capacity of the industry sector.
We saw that manufacturing firms were offsetting high production costs by charging their customers higher prices.
The United Nations Industrial Organisation (UNIDO) notes that the marketability of a product is determined by the productivity or efficiency, product quality and innovation.
In addressing the above, Dangote cement launched a product that is produced out of high quality conformance process.
On August 4 2015, the Zambia Bureau of Standards (ZABS) confirmed that Dangote Cement product conformed to the highest standards.
Generally, the cost of manufacturing in Zambia has been aggravated by the cost of fuel and dependence on few and expensive sources of hydro
electric power.
Dangote Cement has demonstrated efficient management of its average cost and revenue per tonne of producing cement.
The company has managed to maintain low production costs by producing its own thermal power through its 30 mega watt power station.
Generally, there are problems of capacity utilisation in the manufacturing sector with the cement manufacturing sector averaging 66 per cent in the period under review.
This issue of capacity utilisation has been addressed with the addition of the 1.5 million tonnes extra capacity to the industry sector.
The huge capital projects rolled out country wide have provided an expanded market for cement product in the construction sector.
Although the report advocated for regulation of the above suppliers, government policy of allowing other players to invest in power production plants, such as in the case of Dangote provides a natural control of introducing competition as an alternative to direct regulation. Dangote Cement Zambia has shown that the private sector has something to do to provoke the thinking paradigms.
From my recent encounter with Dangote Zambia country manager Mr Desmond Maharaj I learnt a number of initiatives which the company has invested into to grow the cement manufacturing industry in Zambia.
Dangote Cement has attracted considerable attention with its state-of-the-art innovation, regarding the generation of its own 30-megawatts (MW) thermal electricity which powers its production facilities, ensuring a continuous supply of quality cement.
This innovation has resulted in the unprecedented reduction of the price of choice and quality cement.
Mr Maharaj says Dangote Cement has caused the unprecedented reduction of cement prices from about K75 per 50 kilogramme (KG) bag which the current market leader Lafarge Zambia was charging not so long ago to the current K56 or so.
Mr Maharaj says there would be further investments in production technologies as the company is considering expanding its operations.
The advent of Dangote Cement to the Zambian market addresses the concerns of the Zambia Business Survey, Profile and Productivity of Zambian Businesses report of June 2010.
Empirical evidence currently obtained on the cement market in Lusaka, Kabwe and the Copperbelt towns shows a drastic reduction in the price of cement from around K75 to around K56 per 50 kg bag.
Assuming that the economies of developing thermal electricity in the case of Dangote could be applied in other critical sectors of the economy such as the mining industry, we can draw some lessons from
Dangote for application in those sectors.
Apart from producing 30 MW power plant to run its production facilities, all production facilities use the latest high technology and are designed to be highly energy efficient and thus consume less electricity while maximising output.
Dangote Cement has designed all operations in-house including their own limestone quarry mine operations, apart from the 30-MW power plant that will generate energy for the cement plant.
Every operation is run in-house allowing customers to benefit from cost reduction in form of low prices for quality cement.
In developing the business strategy, the company made a critical assessment of current market conditions and external environment in which the company operates.
The company did this because it was fully aware that global warming levels may not guarantee the continuation of the historic hydro-electric power generation levels in Zambia and the sub-region.
-For comment e-mail: ntumbograndy@yahoo.com or call: +260977403113.
(The author is the Managing consultant at GN Grant Business Consultant, a Chartered Certified Accountant, a Master of Business Administration (MBA) holder and a candidate for the Herriot Watt University (Scotland) Doctor of Business Administration (DBA))
