Markets & Finance

Savannah plans raising annual cement output to 2.4m tonnes


Savanannah Cement managing director Ronald Ndegwa. PHOTO | SALATON NJAU

Savannah Cement is set to raise annual production capacity to 2.4 million tonnes in a multi-billion shilling investment at its Athi River plant as it targets a larger share of infrastructure cement supply.

Savannah, which started operations in 2012, currently produces 1.2 million tonnes annually at the Athi River plant, which has an installed capacity of 1.5 million tonnes.

The company expects the additional capacity to be in place by mid-2018 as it joins other major cement makers in the country looking for additional capacity to satisfy rising demand.

Project disclosures by the National Environment Management Authority (Nema) show that the project will involve installation of an additional cement grinding mill and a packing plant. Savannah is currently seeking Nema approvals for the plant.

“We are hoping to issue the tender for the project in early 2017, possibly January or February. Being a second production line, construction work should take anything between 14 and 18 months, therefore we would have the plant up and running by mid-2018. Once we get the approvals we will immediately look to finalise the financing aspect of the project,” said Savannah Cement managing director Ronald Ndegwa.

He added that the firm was betting on additional production capacity to expand its range of cement, especially the blend known as a Hydraulic Road Binder (HRB) used in road construction to stabilise surfaces.

“It will allow us to adjust to the new reality in the cement sector where the market is dictating what type of cement we produce,” he said. He, however, declined to disclose the outlay the firm is making to put up the plant, saying that disclosure might affect the bidding process. Cement plants normally cost billions to set up.

Cement consumption has been growing rapidly in the region, leading to companies increasing their capacity — which has been running ahead of demand.

READ: Savannah signs cement deals with mall contractors

Bamburi Cement, the biggest local producer, recently announced plans to raise the capacity of its Athi River plant by 53.3 per cent to 2.3 million tonnes from 1.5 million tonnes through installing a new grinding mill, the firm said in an environmental audit report.

Analysis by AIB Capital shows that Kenya’s cement consumption has seen a compound annual growth rate of 13.4 per cent between 2009 and 2015 while growth in production has averaged 11 per cent.

Kenya has a production capacity of about 8.9 million metric tonnes a year, with actual production at 6.5 million tonnes though.

“The main demand driver has been housing. However, infrastructure demand is significantly increasing as the region plugs its infrastructural gap,” said AIB Capital in its latest cement sector report.