Lemi National Cement, which was the first to invest a significant amount in a greenfield project and formally opened a week ago, plans to expand further in order to increase its output by double.
The facility was built with a USD 600 million joint venture (JV) investment by the leading Ethiopian industrial conglomerate East African Holding and Hong Kong-based Western International Holdings.
According to analysts, this represents the largest investment amount ever made by a single greenfield project in Ethiopia’s private sector.
Experts who look to private sector investments and foreign direct investments (FDIs) as important signs that the nation would accept more of these kinds of massive investments have described the facility that propelled National Cement to a dominant position in the market.
They said that the modern facility, which can produce 10,000 tons of clinker per day, is significantly superior to the cement plants that were established years ago and were regarded as industry leaders.
In addition to USD 600 million, the project finance is quite special. According to Batuael Buzuayehu, General Manager of Investment at East African Holding, “nearly 73 percent comes from our own equity, with the remaining amount coming from a local bank and a long-term payment credit facility from the contractor.”
For this sort of undertaking, banks typically cover 70% of the costs in reverse.
The General Manager of Investments stated, “Since we are investing with our own resources, it will give us big leverage for new upcoming projects.”
The General Manager also mentioned that 350 vehicles that would be used for cement distribution had already arrived from Djibouti with extra funding.
The whole USD 600 million investment went toward the greenfield project, with 800 million birr going for compensation to locals at Lemi.
Over the past five years, East African Holding has entered into JVs with numerous of its industrial divisions, each with the expectation that the economy will be opened up to global companies, as the government just did.
Based on the experiences of other countries, Batuael claims that local businesses have difficulties when the economy opens up to foreign competitors. As a result, “we have decided to include resources, experience, and knowledge of others in our business with the aim to be ready prior to the reform.”
“We have worked on several joint ventures in various industries, and this one with Western International is our sixth joint venture,” he clarified.
The Hong Kong company arrived with equity to acquire a stake in National Cement, “and we have chosen to work together on a significant project using the resource. We have seen the outcome already,” he told Capital.
“With an annual capacity of 5 million metric tons of cement, this project is set to revolutionize the cement industry, bridging the supply gap and fueling Ethiopia’s critical infrastructure development,” Buzuayehu Tadele, Chairman of East African Holding and National Cement, said on Saturday, September 28, when the cement mill was officially inaugurated in the presence of Prime Minister Abiy Ahmed.
Less than two years are needed for the plant to be completely operational, which is situated at a massive limestone resource location in Lemi, 130 km north of Addis Ababa in the Amhara region.
According to Batuael’s evidence, Sinoma, the industry’s worldwide titan, is also working on the project that will enable it to be completed on schedule.
“Our cement factories will collectively produce six million tons of cement annually. Lemi comes to produce five million tons, and the plant in Dire Dawa, which is 510 km east of Addis Ababa, has a capacity to produce 1.3 million tons,” he stated.
Although Ethiopia has an installed capacity of around 12 million tons of cement per year, only six million tons were produced in the last budget year.
The General Manager of Investments stated, “If you see our potential, we have doubled the actual production in the country so we can say that the price and market shall be significantly stabilized.”
He goes on to say that “to maintain the market leadership we definitely have new project” since the economy has opened up to international companies, which would lead to a jump in cement consumption.
According to the data that Capital obtained, East African Holding has made the decision to double its output at Lemi, and the necessary steps have already been taken to start the expansion.
With the majority of the infrastructures, including the 200 MW power supply line that cost USD 25 million and would support two production lines, developed for the current factory, “we have the advantage that we can erect a plant that can produce 10,000 tons of clinker per day with half of the investment spent on the previous project,” he said.
In addition, the company plans to expand its prefabricated home plant, which is presently in commission, and establish facilities for glass, gypsum, and related items at Lemi.
In a similar vein, the firm plans to build a factory in Melka Jebdu, Dire Dawa, which will very soon be able to manufacture 6,000 tone clinkers per day, with the goal of increasing exports in the regional market.
Along with lime and PP bags, the steel manufacturing facility project will be included in the Dire Dawa.
Batuael claims that the steel plant and the cement factory project in Dire Dawa would begin construction in the coming few months.
“Achieving such a huge investment is a great success for East African Holding that would uplift its operation further,” he stated. “For the past seven years, we were not engaged in trading, which is very easy business with high profit margin.” The company oversees more than 10,000 employees.
“On the country that faces several challenges, we are thrilled to have completed such a significant investment as a company that has been in business for the last thirty years,” he concluded.
Lemi has a potential to create direct and indirect job opportunity for more than 20,000 individuals.
Source: Lemi National Cement unveils ambitious expansion plans
