Derba Cement embarks on an ambitious plant expansion that will double its daily production to 150,000qtl upon completion. If realised, the company will be the largest cement producer in Ethiopia.
Derba looks to sign an agreement with the China National Building Material (CNBM) this week. According to Haile Assegide, general manager of Derba Cement, prior attempts made to expand production capacity in 2017 were constrained by the power supply shortages. He said issues related to the power supply will not impede the expansion this time around, indicating the installation of a 23Km transmission line from the nearby Chancho town with 12 million dollars, which is moving according to the project timeline.
"The project contractor, Sinohydro construction limited, has already completed the civil work," Haile told Fortune. The expanded plant will be erected on 23hct at the Mughar Valley, Oromia Regional State, 70Km north of Addis Abeba. It is supposed to be near the current factory, constructed with 385 million dollars. Derba Cement, a subsidiary of the Midroc Group, was founded in 2006, owned by the business tycoon Mohamed Hussien Al-Amoudi and his family and entered the market in 2012.
Company executives affirmed that the expansion project include the installation of machinery, plant construction, and acquisition of earth-moving machinery with a whopping 500 million dollar investment. Despite indicating the investment allocated to the expansion, they remain tight-lipped about the potential sources of the fund. The company needs 94MVA to quench its production demand. "We've opened a letter of credit (LC) to import essential equipment for the electromechanical works," he said.
The expansion is slated to start production within two years, starting its construction in the next six months. It is expected to create more than 3,000 job opportunities.
The production scale-up availed by the plant expansion brings good news to the construction industry plagued by the soaring price hike witnessed in construction inputs. The construction industry, which comprises over 20,000 contractors while accounting for more than 25pc of the GDP, has been heavily strangled by rising cement costs which show a 20.97pc increase since the start of 2023.
According to the study conducted by the Ministry of Mines, despite the annual demand reaching 36 million tons, the actual supply made by 18 active cement factories stands at 7.6 million tons. Mismatches in demand and supply are further exasperated by the 60pc fall in production from the target set at the outset of this year. Industry insiders ascribe such considerable deficit to recurrent security issues, the inadequacy of input supplies, and the forex crunch haunting the import-export sector. The efficiency of project expansions, while most cement plants are grappling with input supply constraints, forex crunch, and security issues, is debatable.
