Dangote Cement’s New Price

Funsho Arogundade As Dangote Cement plc explains cut in the price of its grades of cement products, stakeholders weigh in on implications When Dangote Cement plc announced a fortnight ago the price cut of its cement grades, it was received with mixed-reactions. The company slashed its ex-factory price of cement from N1,700 to N1,000 per bag, representing about 40 per cent discount on the prevailing market price. While the 32.5 cement grade will sell at N1,000, its 42.5 grade will now go for N1,150. Devakumar Edwin, group managing director, Dangote Cement plc, explained that the new price regime was introduced in the best interest of Nigerians who have all along been looking forward to the slash just as all cement manufacturers continued to increase their production capacities to meet and, perhaps, surpass national consumption need. [caption id="attachment_14871" align="aligncenter" width="300"] •Edwin, Dangote Cements GMD[/caption] Edwin pointed out that reduction in the price of building materials, particularly cement, which is within the company’s control, is one of the strategies of reducing housing deficit in the country. “It has always been our desire at Dangote Cement plc to reduce the price of our products to enable many more Nigerians to build their own houses. We will continue to appraise our pricing regime in Nigeria’s best interest, from time to time. We are an ethical organisation and we believe in putting our customers first, before profit. We believe in creating value for all our stakeholders in a sustainable manner and we will continue to pursue this philosophy,” he said. Amidst expression of surprise on the new price revolution, the Dangote Cement plc boss assured that the company will design a monitoring process that will ensure that profiteers do not hijack the new price cut so that it end users of the commodity can benefit directly. Despite its huge population, Nigeria has a low home-ownership level with an estimation of a little above 10 per cent in the world. The country’s mortgage industry also makes the least contribution to the national gross domestic product, GDP. While the United States is said to boast of 63 per cent, United Kingdom, 64 per cent, Germany, 55 per cent, South Africa, 20 per cent and Ghana with 3 per cent, with Nigeria contributing a paltry 0.12 per cent. It was this gap that Dangote Cement plc claimed this new price regime is coming to plug. Dangote Cement plc already has support in one of the competitors, Bua Group, led by billionaire merchant, Samad Rabiu. He lauded his rival’s will at slicing the price and promised to follow suit with a similar cut on cement produced by his plants in Benin and Sokoto. Sijibomi Ogundele, property developer and CEO, Sujimoto Construction Ltd., described the reduction of prices by Dangote Cement as a laudable accomplishment by the company and a bonus of sorts to those in the real estate industry. “This is good news for every Nigerian who aspires to build a house or even trade in the cement industry. We are all optimistic and find this a welcoming gesture by Nigeria’s foremost conglomerate and a sign of better things to come,” Ogundele said. [caption id="attachment_14872" align="aligncenter" width="284"] •Siji Ogundele[/caption] Akinmoladun Olaniyi, secretary, Lagos State Bricklayers Association, told this magazine that Dangote Cement plc deserved commendation for the price reduction, adding that the slash will definitely lead to an increase in building and construction, thus creating more jobs for members of his association. But some industry analysts see the new price cut as a bitter pill for the rival cement manufacturing companies to swallow. Sola Salako, television presenter and consumer rights advocate, believes that Dangote Cement plc’s crashing of the price is to stifle competition at the end of the day. “With Dangote just single-handedly crashing the price of cement, this seems like a benefit for consumers in the short term, but I fear it is very inimical to growth in that sector in the long term. The few competing brands may eventually close down if they don’t survive the price war after emerging bruised from the pseudo-classification battle. More unemployment looms,” Salako opined, explaining that for a long term-oriented people, the news was nothing to rejoice about. “Just as Dangote has the singular power to determine pricing downwards, who will challenge him when he pushes price to N3,000 after he has successfully run competition out of the market? This is akin to a rat nibbling away at your feet and blowing soothing air so you don’t feel it…until it hits blood,” she added. But Edwin allayed such fears of job losses, pointing out that if anything, it would lead to job creation. “We were not producing 32.5 grade before but because of the standardisation, which comes with the need to offer all our customers the benefit of choice from out bouquet of products, we have introduced it. That is more work for more people,” he said. On the ambivalent emotions of cement dealers whose warehouse already stocked to capacity, the company assured that consumers will begin to feel the impact of the price cuts sooner, rather than later. With 70 depots scattered nationwide and plans to double that number from which end-users can buy directly instead of from third party outlets, the company promised to also ensure that transportation cost in the entire South does not exceed N100 a bag while in the core North that has a larger land mass, the highest that is paid for transportation will be N200 a bag. [caption id="attachment_14873" align="aligncenter" width="201"] •Sola-Salako[/caption] The leading cement manufacturer recently unveiled its new 32.5 cement grade as well as the new packaging as ordered by the Standards Organisation of Nigeria, SON, for clear distinction among the various cement grades. Oare Ojeikere, chief marketing officer, Dangote Group, said the new product is in line with the directive of SON, which stipulates the use of three (32.5, 42.5 and 52.5) grades of cement. According to him, the new cement product, 32.5, is to be used for plastering only as directed by the SON. He called on builders to adhere to the directive, adding that standard for cement was not invented in Nigeria but follows global best practices. [caption id="attachment_14870" align="aligncenter" width="300"] •Dangote cement[/caption] Dangote Cement plc retains a tight grip on the commodity as it controls about 60 per cent of market share in Nigeria. The company is also on course towards consolidating its leadership position on the continent. Before the end of the year, the company said it will commission four new cement plants, in Senegal, Cameroon, Ethiopia and Zambia. Its other plants that are currently at various stages of completion in eight other African countries will be commissioned between next year and 2016.