Lafarge taken to competition watchdog over Portland

French multinational Lafarge has once again been reported to the Competition Authority of Kenya (CAK) for restrictive trade practices at the East African Portland Cement Company (EAPCC).

A group of Kajiado politicians want the competition regulator to probe Lafarge’s dominance of the EAPCC board, sale of clinker — a key raw material — at high prices to the cement firm and conflict of interest where the company’s chief operation officer is also an employee of the Paris-based conglomerate.

The government in 2013 also asked the competition watchdog to investigate Lafarge’s alleged uncompetitive behaviour, accusing the multinational of seeking to damage in order to protect its interests in Bamburi Cement.

Lafarge has a 41.7 per cent interest in Portland cement and owns 58.9 per cent of Bamburi Cement.

“By having three directors sit on the board of directors of EAPCC, Lafarge is mischievously attempting to acquire a dominant position in order to control the affairs of EAPCC and inevitably push EAPCC to a position of unfair disadvantage prejudicial to the business interest of EAPCC,” Wilfred Nchoki of Kajiado Youth Alliance wrote in a letter to CAK.

He mentions Didier Tresarrieu, a former managing director at Bamburi, as participating in EAPCC board affairs in a role dubbed advisor. Directors representing Lafarge in EAPCC are former Capital Markets Authority chair Kung’u Gatabaki and Prof Serone Ole Sena.

Mr Tresarrieu is backed by the technical support deal EAPCC inked with Lafarge last year to help turnaround the loss-making cement firm.

The turnaround plan also saw the appointment of Lafarge executive Albert Sigei as Portland’s chief operating officer in charge production operations, supply chain management, sales and marketing.

READ: Lafarge spoils for a fight with State over Portland

Mr Sigei has been accused of earning two salaries because he remains an employee of Lafarge while still serving as COO at Portland. This, the petition says, has seen him serve the interest of the French multinational to the detriment of EAPCC.

“Since Mr Sigei’s appointment, EAPCC’s performance has deteriorated,” says the CAK petition.

EAPCC announced a profit warning in February for the year ending June after its pre-tax loss widened to Sh745.02 million in the first half on higher finance costs and foreign exchange losses.

Lafarge told the Business Daily in an e-mail response that Mr Sigei had taken a leave of absence from the Paris-based firm where he has worked for 14 years.

“While he remains entitled to some benefits from Lafarge, he is working full time for EAPCC and is not in any executive capacity within Lafarge,” said Lafarge. Kajiado East MP Peris Tobiko has also petitioned President Uhuru Kenyatta to act on Lafarge’s dominance concerns in EAPCC.

“Lafarge cannot be trusted in managing the EAPCC profitably as that places it in direct conflict with its majority ownership in Bamburi Cement,” Ms Tobiko told Mr Kenyatta.

The Kajiado politicians are also uncomfortable with the Lafarge deal of supplying clinker to EAPCC, which they say is expensive and makes Portland uncompetitive in Kenya’s cutthroat cement business.

Sources at EAPCC say they pay $10 (Sh1,000) a tonne more for clinker compared to the prevailing market rates. EAPCC has informed Lafarge of its intention to renegotiate the clinker deal.

The government has in the past asked Lafarge to dilute its shareholding in EAPCC, arguing that its ownership of Bamburi gives it a “monopolistic stake.”

Lafarge is a “financial investor” in EAPCC and, with two out of seven seats on the Kenyan company’s board, doesn’t exert any “operational leverage” on its management or operations, Mr Tresarrieu said in 2014 in response to government concerns.