Dangote vs Lafarge: Cement Grading Wars

Dangote vs Lafarge: Cement Grading Wars

Wednesday, July 2, 2014 10:59 am

Nnamdi Felix

Lafarge Cement Wapco plc, formerly West African Portland Cement plc, is locked in a legal battle with Nigerian regulators after its 32.5 grade cement is deemed unsafe for anything other than plastering.

Lafarge, owned by Lafarge SA, Paris, is one of the oldest cement manufacturing companies in Nigeria. Its nature of business includes the manufacture of cement and paints and repairs of electric motors. However, cement manufacturing is the business for which the company is known in Nigeria.

Lafarge2The company which prides itself as world leader in building materials, which extracts resources from the heart of the earth to make materials to bring to the heart of life, is present in 64 countries with 65,000 employees and claims to be driven by the needs of its customers, shareholders, local communities and architects.

“It is our ambition to contribute to building better cities to help address the challenges of urbanisation today and for the coming decades. Our commitment to sustainability is an integral part of this ambition and underpins our relations with all our stakeholders and informs the choices we make in favour of responsible growth and the preservation of nature.” said Mr. Bruno Lafont, the company’s chairman and Chief Executive Officer.

The company’s capacity to create value for its stakeholders and remain in the cement manufacturing business is, however, being threatened by the decision of the Standards Organisation of Nigeria, SON, to implement a revised cement composition and pigmentation policy in Nigeria. Under this revised cement manufacturing regime, SON issued a classification and application notice which classified the 32.5 grade cement being manufactured by Lafarge as fit for only plastering purposes. The notice also placed the 42.5 grade cement manufactured by Lafarge’s market rival, Dangote Cement, as fit for all purposes. This tips the cement market significantly in favour of Dangote Cement, putting the future of Lafarge Cement company in grave danger.

SON and the Federal Ministry of Trade and Investment duly notified the cement manufacturers and consumers, including industry stakeholder, of the reviewed standard of cement in the country and directed them to comply. It also threatened to invoke sections of its establishment Act which prescribes punishments for manufacturers of substandard products against any manufacturer which fails to comply.

As the greatest beneficiary of the reviewed standards by virtue of its dominance in the production of the 42.5 grade cement, Dangote Cement was quick to comply with the reviewed standard and took out tonnes of advert pages in the media to announce its compliance. In one of such advertisements, Dangote noted that it understands that the new standards which prescribe the production and use of the Grade 5.2 cement for the construction of bridges, the 42.5 grade for the casting of columns, slabs and moulding of blocks and the 3.2 grade for plastering only, are in line with the current prevailing international standards to which the company pledges its full support.

“As a responsible and patriotic corporate citizen with the interest of Nigerians as our primary concern, we state our unreserved support for the new cement standards, especially as this will help to further improve safety in the Nigerian building and construction industry,” Dangote Cement stated in an advertorial.

Faced with this threat to its corporate existence as a financially viable company, Lafarge dragged the SON and the Minister of Trade and Investment, Dr. Olusegun Aganga, before a federal court in Abuja urging the court, amongst other reliefs, to restrain them from enforcing the new cement standards.

In an exparte application filed before the court on 28 May, by Lafarge’s lawyer, Prof. Taiwo Osipitan, a senior advocate of Nigeria, the embattled cement manufacturer argued that SON and the minister have no power to force it to comply with the reviewed standard and claimed that the SON did not follow due process in arriving at the reviewed standards. The lawyer told the court that the cement manufacturing licence obtained by Lafarge for the manufacturing of the former all-purpose 32.5 cement still has up till August 2016 before expiration.

“There was no notice from SON to vary standard. All we had was a letter written on behalf of the Director-General [of SON] that they had set up a technical committee, and the next thing we heard was an advertisement on the purported reviewed standards. The Larfarge WAPCO cement had been in use for over 50 years. We still have till 2016, that is, two years and two months, to continue to produce what we have been licensed to produce.” the senior advocate told the court and therefore pleaded with the court to prevent the SON and the Minister of Trade and Investment from enforcing the provisions of sections 3, 4, 5 and 6 of the SON Act, which create the offences relating to manufacturing of substandard products.

The lawyer further pointed out that section 16, 17, 18, of the SON Act gave the power to the DG to enter into any premises to enforce compliance with the standard they have purportedly set, and thereby urged the court to restrain the defendants from dealing its factories and or prosecuting its officials for refusal to comply with the reviewed standards in cement manufacturing which constitutionality it is challenging before the court. It also demanded that SON be stopped from further public communications on the reviewed standards which, according to Lafarge, is calculated to de-market its products in the market place.

The trial judge, Justice A.R. Mohammed, declined to grant Lafarge the orders it so desperately sought but however ordered that the exparte application be converted to a motion on notice and be served on the defendants and ordered SON and the minister to come and show cause why the reliefs sought by Lafarge should not be granted.

On the return date at the court, SON and the Minister’s lawyers were in court to show cause why the reliefs being sought by Lafarge should not be granted by the court.

On the part of SON, which was represented by Mr. Rickey Tarfa, a senior advocate, the organisation maintained that it is its duty to designate, establish and approve standards in respect of materials, structure and processes for certification of products in commerce and industry throughout Nigeria and that it has completed its duties in establishing the revised specification of mandatory industrial standard against which Lafarge is seeking the injunctive reliefs.

In an affidavit to show cause why interim orders sought by Lafarge should not be granted, SON stated that grade 3.2 cement is the lowest grade and merely suitable for plastering blocks and making light concrete activities while grades 42.5 and 52.5 are suitable for more intensive applications such as solid structures, heavy concrete, marine construction and so on.

It pointed out that many Nigerians are however, in ignorance of the difference between the grades of cement available in the market and that manufacturers of the low grade 32.5, like Lafarge, are taking advantage of this ignorance to sell the 32.5 grade of cement at the same price with the 42.5 grade. It further averred that there are correlations between the misapplication of cement types and building collapse in Nigeria, even though it noted that building collapse can also be as a result of several causes, other than the misapplication of cement grades.

SON also stated that decision to revise the standard already in use in Nigeria, was in order to safeguard life and property in Nigeria, which is in line with its statutory duties.

On the request by Lafarge’s lawyer for the court to make an order for status quo antebellum to be maintained by parties in the matter so as not to render the proceedings before the court an academic exercise, Mr. Tarfa opposed that request and argued that the application for an order of status quo antebellum was an abuse of court process as his client is challenging the jurisdiction of the court to entertain the suit.

Prof. Osipitan urged the court to make some sort of order to preserve the subject matter of the case, noting that it would be a slap on the face of the court if while the case is pending, officials of SON make good their threat to seal up his client’s factories and commence criminal proceedings against the officials of Lafarge for non-compliance with the revised standards in cement manufacturing. “They are desperate to enforce compliance to a process which constitutionality we are challenging here. They stated that refusal to comply will attract criminal sanctions and I am concerned about what the defendants may do to my client.”

The court adjourned further hearing into matter to 15 July, but did not grant any form of orders as demanded by Lafarge. It however noted that the mere fact that the matter was pending before it as well as the presence of the defendants’ lawyers before the court, meant that the defendants are aware of the pending suit and are not expected to do anything to frustrate the case.

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