PHOGEAI^HE FOR THE WEST AFRICAI

Distr.

LIMITED

3 August 1966

///

Originals MGLISH

ECOKOMIC COi/miSSIOU

Sub-regional Meeting on Economic Co-operation in West Africa

j 10-22 October

A

PHOGEAI^HE FOR THE WEST AFRICAI

M66-995

^

Paragraph

1'.

1 -

9 - - 15

- 8

■ 15

■ tasis of couranrs OHAEOER.: _

'-I. PAST TREEDS A$D. PRESET 'LEVEL.OF CEMffl?

CONSUMPTION IIT THE WEST AFRICAN SUB-REGION A, Total Cement Consumption Trends

B. Per Capita Cement Consumption Trends

II. THE CURRENT SITUATION OF CEIMENT SUPPLY IN TBE .

. SUB-REGION AMD ITS PROBLEMS 16-66

■ - '■■■ ■' A. The Growth of the Cement Industry in

West Africa " 16-23

B. Some Significant Features of the Industry ,

Today 24-38

(i) Financing and cost of investment 24 - 29 (ii) Price levels and oosts of production 30-33 (iii) Profitability and the risk element. 34 - 36

(iv) Productivity -.■ 37-38

C, The'Contribution to the Economy of the West

Afrioan Cement Industry ' 39-45

D, The Importance of Imports in the Current

Supply Structure 45 "" 59

(i) Trends in imports by quantity 45 " 53 (ix) Trends in imports by values 54 - 55 (iii) The relative importance of the value

of cement imports ' 56—59

E. The Problem of Transport Costs and their

Influence on Prices 60 - 66

III. PROJECTION OF DEMMD 67 - 88

- A. Choice of Methodology 67 - ~J&

(i) Methodology based on the growth of the

economy 70 " 73

(ii) Methodology based on the growth of the

construction industry 74 - 7°"

B. Estimate of Demand - I98O 77 - 86

C. Estimates of Shortages in Supply — J.98O 87 - 88

TABLE OFCOFTEHTS (Cont'd.)

CHAPTER./-. .'.-■. Paragraph

IV. THE PROBLEMS ABD PROSPECTS OP DEVELOPMENT 89 -117 A, Raw Material and Other Input Requirements 89 -102

• (i) Limestone . 89-99

(ii) Fuel and power 100 —101

(iii) Gypsum and other inputs ■ 102

B. Economies of Scale 103 -113

(i) Cost of investment ■ 104 -107

(ii) Cost of production 108 —113

0. Choice of Technology ' 114 -117

V. PROPOSAL FOR A PBASED PROGRAMME OF DEVELOPMENT 118 -138 A. Resume of the Main Considerations Governing

the Development of the Industry ' . 118 -129

B. Proposed Programme of Development and its '

Cost 130 -134

C. The Significance of the Development Programme

to the Economy , ' 135 —138

AMES TiLBLES- AMD GRAPES

- ii -

chapter i

. PAST TRM)8 MD PKESEMT LEVEL OF CMW COHSUWHPIQIff III THE].

■WEST AiEIGM

Total Consumption Trends

1» Over tho period 1949-1963? cement consumption in the West.African . sub-region rose from 0o6 million tons to 2o0 million tons? i.e* a rise of over 230 per cent0 This was a greater increase than for the continent as a tikol© wfcioh rs£.iv^tcrvd a r:l^ of I033 ^:; 135 xc* G-nt only during the same period? and comparable to the world trend in consumption which

showed an increase of nearly 215 per cent (see Table l«l)«. Furthermore?

the annual rate of growth of cement consumption in the sub-region which

was 8O3 per cent in the ten-year period 1953-1963 exceeded those of both Africa (5«0 per oent) and the world (7*5 Per oezit)^ A faster growth was

realized in the period praoeeding 1960$ while in subsequent years the rate seems to have levelled off considerably,, This trend is also reflected for the continent as a whole, "but not for world consumption of cements which on the contrary has kept up a steady growth rate over the whole period*

2o The sub-region*.^ share of the continent's cement consumption is on the other ha^id small. Over the period 1949~1963* "this share fell in the , range of 10-19 poi" cent* It is3 however5 significant to note that the sub-regions .share of total African consumption has been steadily increas ing from about 10-12 pex cent in the early fifties to about 16-19 per oent in the early sixties. This evidently is the result of the higher rate of growth of cement consumption which took place in the sub-region ■ in relation to that of the continents It would seem that the sharp .. . declines-*in the cement consumptions which took place in the East and Central African sub-regions in recent years have been the main cause for the slowing down in the continent's rate of growth of consumption.

l/ The Cement and Allied Industries in the East African aub-region,

ECA July 1965.

Page 2

K ^U I" "■"■■■'

Trends in Cement- Consumption ■ in .the West African Sub-region in Relation to African and World Consumption 1949-1964

Year

1949

1950

1951

1952

1953 1954 1955 1956 1957 1958 1959

I960 - 1961• ;■' 1962

1963'

West Africa Consumption

(in million tons)

0,5

0.6

°"9

0.8

0,9

1,0 .1.2

1.3 1.3" ' 1,5

1.6

c: 3^9 ", ■■ -.. ■ .■:.;■ 2*0 ■ ' ■■

-;'; "2.1 -■

■ ■ ' 2,0 ■■■■■.

Annual Hate of Growth

1953-1963

Sources

Index Base year'

%_

67

100

89

100 111 133

144 144 167

178 211 222 233 222

8.3

Africa

Consumption

(in million

" 5.2 ' ■

6n0

7.4 7-5

7o5 8.1

'9.0

9.1

"9.1 9.9

10.1

1 10.9

10.3

■ . ll.l 12.2

Index Base year

. 1953

67 80

99

100 100 . 108 . 120 122 122 131

135

146

137

148 162

5.0

National Statisticsi United Nations Yearbook of ^

■ ■■ - ..World

Consumption '

.(in million^-;-::- tons)

117.2 133,0 150,2 160.0 178,7

193*0 ;

217,0.

235.0 247.O.

163.0 294.0

■ 317.0 :i::

335.0' ■':"'°

358.6 ^ '.'

368,0 -■ '

Orade Statistics,

'-' ' Index Base year

1953

66

74

'". 84

90 100 108 121 132 138

147

I65

"■z HI f-^ 187

.i 2:H 2Oq

"' 206

7.5

United Nations Statistical Yearbook^ Combureau, World. Cement- Market

in Figures 1953-1962.

Page 3

3. Hot all countries.in the sub-region have enjoyed the high rate of growth noted for the sub-region. Table 1»2 "below, which is based on the data of,Table 1 in the annex* brings out the disparities among

countries. The countries of former Frendh. West Africa and Togo registered growth rates of the order of less than 7 per dent in the decade 1954-1964* In the former group of countries, the lower growth

rate was the result of a general levelling off in consumption in recent years and of the eventual fall in consumption recorded in 1964. With the exception of this fall, the group as a whole have shown steady growth rates over the fifteen year period 1949-1964. However, this cannot be said of the individual countries within the group as the data subsequent

to 1958 shown in Table 1 demonstrate. Within the period I958-I964,

major fluctuations in consumption have taken place in Dahomey, Guinea?

Mali, and Mauritania. Although not as notable some fluctuation has taken place in Senegal. The Ivory Coast was the only country within the group which recorded a steady growth in consumption.

TABLE 1.2

Rates of Growth of Cement Consumption in the Countries of the West African

Country

Gambia Ghana

Former I^renoh West Africa

Liberia Nigeria Sierra Leon©

Togo

Sub-region

Sub-region -- Percentage

Percentage change Compounded Annual over the period Rate of Growth in

1949-1964 the period 1954-64

526 229 256 424 253 210

330

10.3

10.6

6.4

7.9

8.8 .9.6

5.6

8.0

Page 4

4, But the feature of fluctuations was not restricted to this group of countries aloneo Gambia^ Liberia^ Sierra Leone? Togo and to some extent Ghana' also have all gone through varying phases of fluctuations.

On the other hand-,-Nigeria recorded a steady uninterrupted increase in consumption throughout the: whole fifteen year period of observation.

By and large3 however, the majority of countries in the sub-region have ended up in the sixties with consumption levels higher than these were in the late fifties« Guinea and Liberia are the only notable exceptions in this connexion*

5« A more striking disparity among the countries of the sub-region is readily apparent in the consumption levels of individual countries.

Again based on the data of Table 1? the ceraont consumption for each

country tcfcr &3 an average over the period I96O-I964 together with

the percentage share of each country of the sub^region*s consumption

are shown'in Eable 1.3 "below. Tlio countries are listed in descending

order of consumption levels.

TAB7J3 1;3

Distribution of Cement Consumption amo23g..tfcp_Oountrieg__gf_thot West African" Sub-region

Country placed according to rank

Average consumption Percentage share of Percentage share

■■■1960-1964- ■"'■■■ sub-region's oemsnt of sub-region1 s Thousand tons consumption I96O-64 investments in

1 ... .... . 00nstruction

1961-1964

l0 Nigeria 2. Ghana 3O Senegal 4o Ivory Coast

5« Guinea 60 Dahomey - 7= Sierra Leone 80 Liberia 9* Togo - ' 10o Mauritania lit, Upper Volta

12. -Mali.... *

13,. Niger 14o "Gambia

Sub-region

823

472' 190 146 73 60 58

89

41.3) 23.7)

7°3)

3«7) 3-0)

2.9) 2.5)

81,8

12ol

34-9

22,4

.8,5

10.6

■ 1.6) 2.0) 2,2) 5=2)

76.4

11,0

a/ Average taken is for the period 1961-1964'

B/C3ST. 14/HSTH/X17

Page 5

6. Nigeria singly accounts for nearly 42 per cent of the sub-region1s cement markets and at over 800-»OOG t«p,a, consumption level? it supersedes the next country - Ghana - "by nearly half this amount. Nigeria and Ghana

"between them account for just over 65 per cent of the sub-region's cement consumption and exceed "by far the consumption levels of the nest two countries? namely Senegal and the Ivory Coasts These four countries are the only ones with national cement markets exceeding 1005000 t.p.a.

Between them3 the four countries account for 8la8 per cent of the sub~

region1s cement consumption. The remaining 3.8.2 per cent are distributed

among the other ten countries of the sub-regicn- Guinea, Dahomey, Sierra Leone and Liberia form the third group with national cement markets fall ing in the range of 5O-6OSOOO t.p.a. Together they account' for 12.1 per cent of the sub-region's consumption? each country's share,varying from 2.5-3.0 per cent. Togo is on the borderline with a size of national

market of just less than 4G3OOO ■ t<,p«ao 3 and is followed by a.-group of

countries? namely Mauritania? Mali and Upper Yolta with national markets of about 20,000 t.paa* This group accounts for only 3*3 per cent of the sub-region's consumption? and the share of the individual countries

falls, just over 1,0 per cent. Finally at the bottom'of the scale are

Higer and Gambia with national- markets of the order of 10,000 t.p.a,

and accounting for less than I per cent of. the sub-region1s consumption of cement.

7, The above distribution of the cement market has not furthermore changed significantly'from its pattern in the nineteen fifties. Minor shifts have taken place in some casess but by and large the sequence

of countries indicated in Table 1.3 has not altered appreciably especially

in so far as the major cement consumer countries are concerned* Further it oould be noted from the last column of Table 1.3 that, the distribution of. the cement market follows closely: the sub-regional distribution of investments in over-all constructions. The first four countries which

dominate the cement market of the sub-region also account for the-bulk

of construction investments taking place in the sub-region - in effect

they account for 76.4 per; cent of total construction investments*

Page 6

Similarly- the large disparity between these'same countries and the rest '•■of. the countries of the sub-region noted in the case of cement consump^.

tion 'is also reflected in the distribution of construction investments..

in that the second important group of countries account for a more 11O0 per cent of total construction investments.

8B It is also apparent from the table that the sequence of importance established for cement .consumption is.not strictly the same as for the.

sequence of importance of construction investments* Notable exceptions are Liberia &nd Mauritania which show, a higher position in the latter case. This might be explained by the nature of construction investments

which took place'in these countries* In the period under observation,

it is observed that the bulk of investments in construction were directed

at railway constructions and at developing the mining industry, both of which have low cement utilization characteristics■; ' Other inconsistencies

between the-two series of percentage shares of Table 1;'3, e.g. in the cases of Dahomey.) Niger,, Upper Voltas Sierra Leone, etc." might be . explained by differences in concepts us,ed for estimating investments

taking place in the traditional sector*-^ .. ...

9* Per capita trends in oement consumption would serve a useful purpose in defining the real disparities in. consumption levels among countries.

Theywould reveal the gap "between the countries of the sub-region, and

furthermore, in comparing the sub-region's level of per capita consump- tion to those of developed countriess the size of possible consumption ■

targets could'-be identified thus facilitating the long-term .planning of tjie,. cement industry* :

10i' In liable 1«4 belows the £er_cap_itaF oement consumption trends of the sub^-region are compared to those of the continent in the first place and. -the world in the second. Hot unlike? Table 1.1, this table also' '

1/ See Construction in Economic Developmenta ECA/1966,

!!^^

Page 7

shows' that the West African sub-region has enjoyed a high rate of -growth of per capita cement consumption - in fact higher than the world- average, Nevertheless, its per capita cement consumption level has continued to

"be "but a small fraction not only of the world average "but also that of

the-continent. It is? howeverV'significant to note that while the ratio

of per capita consumption of Africa to that of the world level'fell from

about l/3 in the early fifties to less than 1/4 in the early Sixties, that.of the sub-region rose from about l/lO to- about l/8. In relation

to the continent's level of per capita- consumption ,■ the sub-region's

share rose from about l/3 in the early fifties to about -| in the early

sixties. Consequently) the sub-region has advanced to third position in-relation to the other sub-regions. But its per capita consumption

level -is currently.still less than l/3 of the North African sub-region which precedes it«-/■ ■ .

. . ' . • ■ TA3LE 1,4 '

Per Capita Cement Consumption of the West African Sub-region in .

Comparison to Africa and the World 1953-1963

P.C. Con- Base year P.C. Con- Base year P.C. Con- Base year Year'1 ' ' 'sumption 1953' sumption 1953 sumption- 1953

: ■ ■■.. ■ ■ W.Africa . Index Africa Index World:. Index

". . . . kg ' kg kg

1953 ■ 12 100 • 32 . 100 67 100

1954 13 108 34 106 72 108

1955 14 117 36 113 79 118

1956 15. 125 36 113 84 125

1957 16 133 36 113 87 ' 130

1938: ■• .. .--. 18 150 38 119 . 91 '-.•■ 136

1959 19 158 38 119 100 149

1966 21 175 40 125 105 ' 157

1961-,. .-. 22 ■■■ 183 37 116 ■ 109 163

1962 23 192 39 122 114 170

1963 ' 23 192 42 131 115 172

Compounded annual ...

rate of:-growth:- ■' ' ' 6.7 * 2.8' '"" ' ' ' 5.6

1953-63 . , -•■--,■■■- ■- Sources op.cit. Table l.lo

TJ Sees A Review of the Building Materials Industry in Africa, B/CN.l4/AS/lIl/5?

ECA, Sec, 1965.

Page 8 /

11. The .disparities in per capita levels noted above are also reflected within the sub-region itself. This is apparent from the data of Table 2 in the annex. Per capita Gement consumptions in the early sixties varied

from less than 6. kg. (Gambia? Mali, Niger and "Upper Yolta) to over 60 kg."

(Ghana and Senegal). In 196l5 for example, the lowest per capita recorded

.(3 kg» for Mali) was a mere 1/24 of the highest for the sub-region

(72 kg. for Ghana) in the same year,

12. Aspects so far unnoticed in the trend in cement consumption also become evident from the date of Table 1, Firstly, a steady growth in per capita consumption was not z'ealized in any of the countries of the sub-region. Even in Nigeria, where it was noted that total consumption had increased steadily, a decline in per .capita consumption is now evident subsequent-to 1961. .fluctuations in per capita levels have been the

characteristic feature for the majority of the countries of the sub- region. Secondly., the growth rates of per capita cement consumptions of the majority of the countries in the period I954-I964 were not as

impressive as they appeared in terms of absolute consumption-levels.

In the majority of countries the percentage change in per capita consump tions- was less than 100. In Nigeria ? for example, this was- only 17- ■per-.

cent over 'the' period under consideration (see Table_1.5 below). Again

■stressing the fluctuations-in. per capita consumptions? the rates of growth.over the whole period are considerably smaller than the best

growth rates attained by the countries within a period of not less than :.

five years between 1954 and 1964°

13. Thirdly, in terms of per capita consumptions, a sequence of

importance among the countriess different to the one noted earlier (see.

lable 1,3)"emerges. This is indicated in Table 1.6 below based on the

■average per capita consumption over the period I96O-I964. It will be noted that only four countries in the sub-region (Ghana, Senegal, Ivorv Coast and Liberia in that order) registered per capita levels

exceeding 40 kg. and accounted for 2-3 times the average per capita

level for the sub-region as a whole. A further four countries) namely

Page 9

TABLE 1.5 .

Rate'Of Growth of Per Capita Cement Consumption in the Countries

of the West African Sub-region 1354-1964

Country- Percentage'

change.

1954-1964

Rate of Gi-owth of P.O.

consumption I954-I964 Best Eate of Growth of P.C. Consumption over a period of not less than

5 years

Gambia 100

Ghana , 63

'Former Fr. West Africa 25

Liberia 100

Higeria ■ . 17

Sierra Leone 125

Togo - '■ ■ 12

14*9 ■ 5«l-

2.3 7-2

8,5 5.3

14.9 6.7

3.8

17.7

10.0 11.1 6.2 Sub--region

Average Per Capita 69

Cement

over

TABLE 1.

Consumption the period

5.4

6 . " ";

Levels of

1960-1964

West African

7-3

Countries

Country placed according to rank

Per capita cement consump*

tion (kg) av»

19 6O-I9.64

Per capita expressed as ratios of sub- regional per capita level

Population

(million)

I960

Broad grouping

according to level of per capita consumption

Ghana Senegal Ivory Coast Liberia Mauritania Dahomey Sierra Leone Togo

Guinea Nigeria Mali ■■■-■

Upper "Volta Kiger

Gambi a

70

58

50 40 30

27

26

25

19

15 5 5

4 3

14.30

6.73

53.07

11-50

II

III

IV

Sub^region ₂₂ 1.00 85-60

Page 10

Mauritania, Dahomey, Sierra Leone and Togo showed per capita levels slightly exceeding the sub-regional average, while Guinea and Nigeria with per capita falling in the range of 15-20 kg, registered less than

the sub-regional average. The remaining countries (Mali, Upper Volta, ttiger and Gambia) with per capita less than 5 kg. showed greater

disparity from the group (Group III), just proceeding them and accounted for 0.2 and less of the sub-regional average,

14• There are further significant features which are noticeable. Firstly, although the highest per capita level reached by a country of the sub- region was 70 kg., yet only 16.7 per cent of the sub-region's population

enjoyed a per capita cement consumption exceeding 40 kg. The bulk of the population in. fact 74.6 per cent of the sub-region's population accounted for less than 20 kg per capita consumption, of which moreover, 21.7 per cent had per capita less than 5 kg. Secondly, the lowest per capita level was a mere l/20th of the highest in the sub-region. Thirdly,

with the exception of Gambia^ the countries at the bottom of the per capita scale are land-locked countries.

15» These observations highlight the considerable disparities among the countries of the sub-region and indicate the immediate targets which the countries with/low' per capita levels could aim at in the first stage.

The underlying reasons for the disparities are the result -of several

factors, the most important of which can only be explained within the framework of the over-all economy. The factors specific to the cement

industry are however largely limited to the level of construction activity to which reference has already been made (see page 5)s the intensity of

cement utilization, and the problems of supply of cement. The latter

aspect is by far the most significant in explaining disparities in consumption levels among countries. Due consideration will now be

given to the cement supply structure and its problems in the sub-region.

^ •n

Page 11"

CHAPTER II

THE CUBEBMT .$lTT&$im . OF AmfflM^S3V£LY-.-13$-$SE SUB-KBGIGff- A&D ITS PROBLEMS

A. The Growth of the Cement Industry in West Africa

. 1)5. Up to I964 Nigeria and Senegal -were the only cement-producing coun

tries in the sub-region. Although? the first cement factory to "be esta blished ;in the sub-region dates back to 1941? the major expansion of the cement industry did not begin to materialise until the turn of the sixties.

The Higarian cement industry has accounted for the ^considerable expansion of production in the sub-region as is evident from Table 2.1 below. Since the first factory was put into operation in 1958* production increased

TABLE 2.1 .

The- Growth of Cement Production in the West African Sub-region

(thousand tons)

Country :.- 1954 1955 1956 1957 1958 1959 19.60 1961 1962 .-. 1963 1964

Nigeria - « - _ .

Senegal" *" " ' 83 129 146 158

Sierra Leone - - - - -■'•■.- _ ' " ■■--' ' ^ „

Sub-region 83 129 146 158 276 290 .333 535 651 724 869

Sources. Op.oit, Table 1,1. ' ■'.■..■■:

127

149

119

in"

165

168

353

182

467 I84

534

190

664

205

nearly sixfold. In Senegal", the expansion of production has not been

" as' dramatic But here agains production expanded by over twofold in

"the peri6a"1954-1964, and that of the sUb-region rbse"'frora 83j000 tons in 1954 to 869jOOO in 1964) i.e. by over tenfold/

17» Considerable as these expansions in production weTe? "the sub-region

is far from covering the demand for cement by domestic production.

.Table 2.2 below compares domestic production with total demand. Tn

1964? still" less than half of total demand was covered by domestic

Page 12

TABLE 2.2

Share of Total Demand Satisfied "by Domestic .Production

(thousand tons)

Tear Total demand Domestic production Share of domestic production of total

demand (percentage) 1953

1954 1955 1956 1957 1958 1959

I960 1961 1962

1963 1964

916

994 . 1,149

1,266 1,302

1,534

1,593

1,883 1,978

2,018 2,021 2,072

61

83

129 146 158 276 290 333

535 651 724 869

11 12- 12 18 18 18 27 32 36 42

Sources Op.oit., Table 1.1,

production. This all the.same indicates the considerable improvement that has taken place in recent years in the domestic production to total demand ratio. In the early fifties the prevailing ratios -were less than 10 per cent as is evident from lable 2.2. But even at 42 per cent ratio of domestic production to total demand, the sub-region is still "behind all other sub-regions in Africa and far below the continental average which is 80 per cent.-'

18, Thus, an expansion of considerable magnitude can be made in the

cement industry of the West African sub-region, let this should not minimize the notable development' that has taken place. One has only to look back to the late nineteen fifties to appreciate the speed with which the present level of development was attained.

l/ See Review of Building Materials Industry in Africa, E/CN,14/As/lV/5,

EGA, Addis Ababa, December 1965,

Page 13 ;■

19* Prior to 19 5^? only one cement factory was in operation in the sub-region;, This was the factory at Rufisique near Dakar belonging ' to So'coooim-i The factory commenced operations in 1946 with one kiln of 30,000 t.p.a, productive capacity* In 1946S the capacity of the factory was raised to 60,000 t,poa» But in 1948? a complete overhaul'

of the installations were carried "out, the dry process was adopted and

a second rotary kiln installed bringing up the productive capacity to 120,000 t«p*a. Further additions and improvements were made in subsequent years so that today the productive capacity of the factory stands at

some 220,000 tep*a*

20. She development of the Nigerian cement industry was launched off

in 1956j with the coming into operation of Niger-Cen^s (Wigerian Cement Co.Ltd.) factory at Nkalagu? near Enugu - at first with one rotary-kiln of 120,000 t*p«a0 capacity. In 1960? the productive capacity was increased

to 250,000 t<,p*a. and by the middle of 1964, the total number of rotary kilns were increased to four and the total productive capacity was brought up to..'500j000 t6poa0 Somewhat later another cement works was

also started in Western Nigeria. The West African Portland Cement Co.Ltd.

opened the Ewekoro works near Abeoukuta in December 196Oc Soon after, an expansion programme was set in motion and completed in April I964 bringing;the productive capacity of the installations to 45O3OOO t,p,a.

21. Parallel to this development and independent to it, a further

expansion of the cement industry was also taking place in the form of

clinker milling installations. Between I960 and I964, four clinker

mills were put up, two of them in Lagos, one in Port Haroourt and the

fourth in Koko-Sapele. All these mills base their productions on

clinker supplied from Europe * It seems that even in those times when supplies of clinker are delayed or interrupted, which is not infrequent, no attempt is made to secure supplies from the two cement factories

in the country. Between them the four clinker mills account for a

productive capacity of the order of 260yGOO t,poa.

Page 14

22. The expansion of the Nigerian cement industry still continues* ..In the current year, production of cement is expected to commence from .a . ..- new factory that is under construction in Sokote3 Northern Nigeria,' The productive capacity is stated to "be 100?000 tap.aR In addition two other projects are likely to materialise in the near future. These are the Ukpilla project in the Mid-western Region., and the" Calabar project in the Eastern Region with proposed capacities of 150j000'.t«p»a.' respectively*

23» Two other projects in the sub-region have also materialized, A oement factory of 45?OOQ t.p,aQ capacity is starting production in Niger

"before the close of 1966» In Sierra Leone, a clinker grinding plant of 50?000 t.p»a, capacity -came into operation in November 1964. In Ghana, agreements were finalized in 1965 ^or "iM0 ma'3'or clinker grinding plants - the first at Takoradi to be of 400,000 t,p,a* capacity and the

■second, at Tema of 200,000 i.p.a, capacity. The Ivory Coast is also constructing a clinker grinding mill of a capacity of 150,000 tons p»a.

in Abidjan. Another one of about the same capacity is under study-, B. Some Significant Features of the Industry Today :

(O Financing and cost of investment

24* The development of the cement industry in the sub-region was largely the result of the initiative.of the private sector. The Rufisique ■ factory in. Senegal is a wholly private-owned company <, The principal shareholders of the.¥est African Portland Cement Coo are the Blue Circle.

Group of the UK; but in the case of the Nigerian Cement Con the Eastern Nigerian Development Corporation is the main shareholder with Tunnel

Portland Cement (UK) acting as managing agents. The Nigerian clinker

grinding enterprises on the other hand are all private and. in the majority of cases were launched.with external capital*

25- Government financial participation is. getting more important as ■ '■

is evidenced from the recent plants that were created and are being . . . considered for erection• The Malbassa plant in Niger is wholly backed by the Government who set up a joint-stock company^ secured PAC

8B&s^^

15

(]?onds d!aide et de cooperation) aid and guaranteed credits for

machinery and equipment*, The equity capital of the new clinker grinding

. plant in Sierra Leone is subscribed up to 45 per cent by the Government.

. 26. Credit financing.is "being increasingly resorted to by Governments

wishing to set up either cement plants or clinker grinding mills• The Sierra Leone clinker installation was prefinanced by the equipment

suppliers. The two clinker grinding mills in Ghana are also prefinanced projects. But in the Ivory Coast? the clinker mill under construction is privately financed, and in Nigeria private investment continues "fco be the basis for the further planned developments,

27. One reason for the need of Governments to resort to credit financ

ing is that the cement industry calls for heavy investment in fixed assets. Considerably higher capital outlays are used by the countries ■., of the sutv-region to put up cement factories than are used for similar

installations in European countries, In Table 2.3 below are compiled

the unit costs of investments of some of the factories erected in the sub^region and also estimates of unit costs of those under construction.

The Nigerian example shows that the unit cost for a 200,000 t»p'»a»

capacity plant is about two times that of a similar.plant in Europe,

where about $2-3. million are required per IOOjOOO tons capacity, 28, These' differences arise out of the additional expenses required

to set up a cement plant in West Africa and which in general are

universal to all developing countries. Besides transport costs and the related expenses for handling, insurance, commissions, etc. and

installation costs which are invariably carried out by expatriate personnel ? requiring highly remunerative fees, the installation of a ..

cement plant in West Africa is likely to incur other additional costs.

ITew power plants, housing for technicians and workers, access roads,,

site development, etc..might be necessitated by the general conditions

of underdevelopment*

Page 16

TABLE 2,3

Unit Costs of Investments of Cement Factories in the West African Sub-region

Tvoe of installation

Cement factory

Clinker Mill

(new) (Expansion)

(new) (new) (project)

Country

Uigeria/West

Niger

Sierra Leone Ghana

Ivory Coast

Capacity

200,000 250,000 45,000

507ooo 400 ? 000 2005000 120?000^

Year operation started

I960

1964 ■

1966

1964

Unit cost of investment US$ per ton

•■■" 49 17

116 12

14' -14'

10

Sources .Secretariat,

29* Differences in unit costs also exist between the countries1 of "the

sub-region,. The main reason is the high surface transport costs prevail ing within the sub-region,, In general-the costs of coastal plants-are

lower than for similar plants in the land-looked.'countries. The Niger

cement project was started under the assumption that it would not cost

more than $100 per ton to erect. But this had to be modified subsequently

for the reason that transport costs were underestimated. It is, expected that the plant when completed would have cost unit US$120 per ton ,of..

capacity.

(ii) P?ioe levels and ..Qosts_ofj^oduotion_

30c The conditions that: determine'the high unit costs of investment aXs-o- account for the high costs of production. Several of the input items are imported, Fuel oil, gypsum and paper bags are all imported.

The prices' of these items to the factories are evidently raised by

the costs of transport and handling* The further inland the locations of the factories are? the more preponderant the prices of these inputs become in the cost of production. A large stock of imported items

Pago' It

including spare parts has to be-kept to ensure the continuous running

=,-ffl£JitSe-. "'factories. .thm&"-- tyissg^-dowii considerable-funds » Power tariffs are high* The employment: of large numbers -of■ expatriates-.which is a .feature of the.industry,further means that considerable expenses have

to "be incurred in making reimbursements and working conditions adequately

attractive. Although wages, are lower "than in European countries 3 yet :-;: ■

productivity is low and'-:mda?.o-tlian offsets the low wages paid oute

'31« For the'S'e 'and*-other reasons? costs of productions-under West -

African conditions are considerably higher than in Europe,. The threat

of dumping from imported cement can be a real one and the industry

looks to the gOTenaEents for "protection. Thus tariff:protection covers ■.■;

■ the.;linc!ustry in^igoria- license io required to import CQinep-fc and :":;::;r:";

furthermore an import duty is imposed while the local industry is only

liable to the" muoh'-lowor excise dutyv ■ - . . ..-.-■ ■:.. . 32* :-But this protection seecs to have blunted to soniii".extent the ' '"■ ■

competitiveness of the Nigerian com^nt industry. Both local and imported cement are sold at the same, price? and all producers seem to respect .. ■ ■

the same price level* In.ppite of"the considerable expansions that

the two cement factories underwent and in spito of the large markets "'

"■-^mr-:tltf^eli^cjy-^±1;htn- tire- co^xtrypn0 'significant reductions in prices.:...-.:- ■ were made in recent yaarc. The hi.gh prevailing price level and especially-''"

its stability is nonetheless at teaching-new-comers into the industry and thus helping its further expansion" in 'tfre^oun^ry* ■

339 ' Table 2,4 below indicator ex-factory -prices prevailing or estimated in 1964 and compares these to wholesale'prices of imported" cement.''It will be noted that the prices of domestioaily produced cement are not much lower than thoss cf imported cement• Still"the cement-produeing countries do benefit to varyi:;^ degrees from lower cement prices„ Niger would probably be the exception in this respect* Cement produced in Malbassa and transported to the country• s chief market9 Xlianay, is unlikely to ha competitive to imported cament. At 30?e00 tons produc tion it would probably have to equate its price'at Niamey to that of"

imported cement0 The preponderance of transport'"costs for'fuel and "'

other inputa can only be eased through a larger scale of operation*

Vn>,^-|=F^ir:^:;^^

Page 18

TABLE 2.4

Ex-factory Prices of Locally-Produced Cement and "Wholesale Prices of

Country

Senegal

Nigeria

—"—

Sierra Leone Niger

Ghana

Ivory Coast

Factory

SOCOCIM

WAPC Co.

Lagos C ement

"Works SLC Co.

Malbassa Cement Plant Takoradi Plant

■ SICM

Sources Secretariat,

a/

Imported

Type of cement

Portland cement

—ti—

„.«„

—n—

—Tt

" —

Cement XJS$ per ton

Tear

1964

1964

1965

1964

1964

1964 1964

Price per ton of cement ex- factory in . paper bags

22

28

32

26^

z

52

1

22^

Proposed prices. b/ GIF price.

(iii) Profitability and the risk element

Place

Hufisique

Ewekoro

Lagos

Sr.ee town

Malbassa

Takoradi.

Abidjan

Wholesale price per ton of imported cement

-27.0

26.0^

28.0

84,0

28.0 30,0

Place

Dakar

Lagos

Freetown

Hiamey

Takoradi Abidjan

34, Another interesting feature -which becomes apparent from the prices listed in Skble 2.4 are the differences in ex-factory prices which cannot be explained by the factor of scale of operations. Thus the ex-factory prices of the WAPCC in Swokero is higher than the lower capacity plant in Rufisiaue. The clinker mills also show varying ex-factory prices, which again are not related to the sizes of the plants. The ex-factory

prices of the Ivory Coast and Sierra Leone clinker mills are the same,

but the latter1s scale of operation is only l/3 of the former's. This

does not evidently mean that economies of soale are not governing produc

tion costs. Mainly it means that concepts of profitability levels are

—''^ "f"■'

Page 19

different from one enterprise, to the- other„ Further the degree to which , ...investors . are,;preo.ccupied..in .minimizing or eliminating the-risk -element

is "bound to influence the price, level differently.

.35*- .The profitability of the olinker' grinding enterprises'is? for example5

;.^closely tied to the prevailing prices of clinker. These are imported

■■from Europe and their supply is not. always reliable. A construction

"boom'in the.country from which clinker.is normally supplied would probably lea-d to. shortages in supply and/or higher supply prices. Moreover,' once installed the clinker enterprises are at the mercy of the maritime companies,

■Usually these companies enter into third party agreements to ensure cargo for their- return-journeys. Under the circumstances? supplies to the

"clinker mills can be erratic and it frequently happens that they stay ..._Ad:L.e...f?3? .c°nsiderable lengths of time, This'uncertainty does not make

it possible for the clinker enterprises to play a key role in determining the price of cement. A price war would be adverse to their:interests*

36. Also,, high price levels and differences in these levels might on the one hand be the effect of non-utilization of full installed capacity inothe past and-on the other of uncertainties of operating at full

capacity .in the future.' Ib Table 2.5 below are indicated the production tto.capacity ratios of the- sub-region's cement industry in the years I960 .i.,;and..l9.63resEectivelyE Full utilisation of installed capacity has

apparently not been a characteristic'feature of the industry. It might be that ..the'expansion of the industry overestimated the development

of the market in each country but it is also true to say that the erratic productions of the,clinker mills have influenced the-over-all production to. capacity ratio.. The. individual cement plants have hy and large shown high.capacity, utilization. levelso The Senegal plant has enjoyed a produc tion, leve^.. of .the- order, of 80-95 Psr cent in. the period- I96O-I965. One year after the, completion of expansions to the two cement factories in Nigeria:, ..productions reached 85 per cent and 96 per oent of installed ' capacities, B.ut it .should, also remembered- that in earlier years, all these..enterprises.were operating.at .much lower ratios - in-fact of the

order of 50-60 per cent of capacity.

E/CIT.14/INE/117

Page 20

TABLE 2.5

Production to Capacity Ratios in 1961 and 1965 Including Clinker Plants (thousand, tons)

Country-

Productive capacity

_Production

Ratio of produc tion to productive capacity - per centage

1961

1965 1961 1965

19 61

1965

Senegal

Nigeria

Sierra Leone

220 500

—

220 1,210 50

182 353

.181

52/

83

71

83

81 90

Sub-region 720 1,480 535 1,210

74

82

Sources op.cit, Table 1.1.

a/ Provisional figure. .

(iv) Productivity

■37. Another feature of the cement industry in West Africa is the low level of productivity. The cement factory installations in the sub- region are no less capital intensive than their counterparts in,Europe.

Although in certain types of operations such as quarrying, labour employed is likely to be higher, nonetheless ifa general it could be said that

the West African cement industry is not significantly more labour

intensive than it is in Europe.

38. Table 2,6 below indicates the employment and productivity levels in the industry. It will be noted that productivity in the three cement factories of the sub-region fall within the range of 500-600 tons per person employed. This is a mere £-1/3 of productivities attained in European countries., The lack of trained labour is the main underlying' reason, but it is also true that there is some reluctance on the part

of governments to dismiss workers in the wake of increasing productivity

through training. Furthermore, it is important to note that-the employment

Page 21

figures are not always strictly of those engaged in the production process.

When account, is-'.taken: of this the productivity figures listed in the table would "be..slightly higher. Considerable progress has "been achieved in training labour, especially in the ligerian Cement Industry9 But the progress has "been a relatively slow onej possible "because precaution was advised to be imperative in view of the capital intensive feature of the industry and its sensitivity to mishandling. That the expatriate component of employment in the Nigerian Cement Industry came down from over 40 in the early sixties to 25 and 12 in I964 is itself a measure of progress

achieved in training, "

TABLE 2,6 ■ ' . ■

Employment and Productivity in the West African Cement Industry 1964 and

Country

Senegal

Nigeria - WAPCC - FCC

C. The Contribution

thereabouts

Employment

lational Expatriate Total

314 36

739 25

900 12

to the Economy of the

350

764

912

West African

Productivity ■

(tons per employed)

530

■ 540

465 .

Cement Industry

39» Table 2.7 below summarizes the main economic features of the indus

try around I964. Currently the industry offers employment to over 2.5 thousand income earners. "Value added per person engaged in the industry

is higher than the average for the manufacturing industry. The cement

works indicate levels of value added per person engaged in the range

of US$3s500-4,500. Those of the clinker mills are thought to be even higher. These figures again stress the capital intensive characteristics of the industry. In this respect it reflects to a large extent the

technological features of the industrialized countries..

Page 22

... . TABLE 2.7 ■

Contributions of the CementJCnjxistry to the West African Eoonomy

Type of

oper;

tion

Total Q*oss

Input

Value Value

Country opera- prc". eont " ' ^usiness ?otal of which Value-added.- added duotivo Z~~ u output million imported added as per- per

capacity

■ (tons) (million US$)

US$) .

'lip:i^{mil-r centage}of gross son^per- US$ output . en

gaged

. '■■ ' '■ US$

Senegal Cement 220s000 300 3O3 works

x> ~.m_ 95O3O00 1,935 19.3 (ii )Clinke.r' 260 ,OG0 . c : 3.6

mills Sierra Clinker Leone

Sub-region

50,000

2e2

10.6 286

0.9

5-4

0,85

1.1

O n

U.7 1.0

33

45

:28

25

3?7OO

(2358O) 27.4 16.3 10.35 11.1

Sources Secretariat,

40, Value added by the industry was about 3-5 per oent of value added by the manufacturing sector in the cement-producing countries. In. terms of gross output3 value' added by the industry was about 40 por cent. The clinker mills showed a lower ratio, but the cement plants in Nigeria

indicate a ratio higher than the 40 per cent average for the whole of

the producing countries,,

41. The contribution of the industry to GDP is not substantial. Rather?

its impact on the economy lies in. making a highly essential product avail able domestically and at a price lower than for the imported product.

Its main contribution to the economy is. expressed by savings realised in foreign exchange expenditure on the.importation of cement. Produc tion from installed plants in the sub-region amounted to approximately ■

Page 23

1,215 thousand tons in 1965. Were this quantity to "be imported, the foreign exchange outlay required would have amounted to around US|25 million in a single year. This amount, was more than halved to US$10.35 million lay the expansion of the domestic industry (see Table 2.7)»

42. The argument is taken to its logical conclusion in the following

estimatess

1. Investments channeled Million US$

to the expansion of the

industry 1958-1965 ....'• • 26>6

2. Foreign exchange component

of this investment lo.o

3. Import value of domestic . ., produotion realized

cumulated 1958-1965 • •• 97-9

4. Purchases in foreign currency required for domestic

production cumulated over

1958-1965 46.2

5. Estimate of savings in

foreign currency (i.e. row 3-4)

cumulated 1958-1965 -• 51-7

43. It would be noted that the saving in foreign currency accumulated over the seven-year period is estimated to "be US$51.7 million, which considerably exceeds the foreign exchange component of the investments

(US$18.8 million) undertaken in expanding the industry. The difference

would have been greater still were the sub-region's cement industry not

so heavily dependent on imported inputs.. The prospects for further savings in foreign exchange ares however, improving visibly. As of now the fuel oil supply situation is changing in that, oil refineries have

started operating in all the cement-producing countries of the sub- region, and plans exist also to produce paper bags, refractories? etc.

locally.

Page 24

44*■ Domestic production has also meant reliability in ■ .supply and still more important lower prices of cement with prospects of still greater reductions. Thus far., the-cement-producing countries have .enjoyed. : prices which are some US$2-5 per ton less than imported^cement. This - has meant a saving of the order of US$17. million over the period 1958-

1965. '

45» These observations highlight the notable.benefits derived from the expansion of the cement industry. It would? however, be appreciated that, the achievements of the industry are still modest when viewed from the over-all needs of the sub-region and compared to developments that have taken place in the other sub-regions of the African continent. The larger burden of satisfying the:cement needs of the sub-region still falls on imports. When examining the presient state of development of the industry in this perspective3 it would be appreciated that the major effort at development still awaits.the sub-region.

D. The Importance of Imports in. the Current Supply Structure ,. ■'

(i) Trends in imports by quantity

46. Referring back to Table 2.2 ? it was noted that domestic production accounted for 42 per cent of total cement demand in 1964s and that this share was considerably lower in earlier years. Imports have evidently declined in importance in recent years, but it is significant to note that at 58 per cent of total demand they still command a major role.

Moreover the fact that the situation has improved in favour of domestic supply does not me-an that the individual countries have thereby benefited equally. On the contrary, it would be noted from Table 3 in the Annex that it was the- decline, of. imports in the single.most important, consumer and. producer "of cemehty namely■ligeria, which influenced the sub-regional sup-ply'structure'. The majority of the countries, of the sub-region have

in'fact registered steady growth in their imports.

47 • Imports of cement to the 'sub-region rose somewhat steadily from

453jObb'tons in 1949 to a peak of"1,'542,000 tons in i960. Subsequently,

in the wake of the'considerable expansion of domestic production in

Page 25

Nigeria? they fell to 1,, 38.3?000 tons in 1964. The highest annual rate

of growth was thus. 11.8 per cent, while in the period I954-I964? the

annual rate was less than 3.0 per cent. The rate became negative in

the years following I960* . ,

48, The percentage changes and the annual compounded rates of growth- over the: period-1958*0.964 and 1949-1958 respectively are shown for the countries of the sub-region in Table 2.8 below. The percentage ohanges in the period preceeding 19-5& were much greater than those registered subsequent to 1958= This was not only true for the cement-producing countries but also for those which are wholly dependent on imports.

A significant example of the latter is Ghanas which having recorded an annual percentage change of Just less than 30 per cent in the period 1949-1958, subsequently showed an annual increase of less than 10 per cent. This pattern is not.only restricted to Ghana but is also applicable to varying degrees to all the countries of the sub-region with the excep

tion of Gambia? (which in itself is not significant),

49* The trend is somewhat better demonstrated by the annual compounded increase rates listed in the table. These rates are consistently much

lower for the period I95&VI964 than they were in the period 1949-1958,

The sub-regional rate became less than 2.0 per cent subsequent to 1958?

while prior to this date a positive rate of increase of 12.0 per cent

was recorded* All the countries of the sub-region (again with the only exception of Gambia) registered positive annual rates of growth falling

in the range of 8-I5 P©^ cent in the period 1949-1958- While the validity of the statement that the sharp decline of Nigerian imports was the main cause for the- decline of imports to the sub-region cannot be challenged?

yet it is also true that imports of the non—producing countries particularly those of Ghana having not increased as fast in recent years as it did in the past has also encouraged the general decline of imports to the sub- region.

50, The observation that the rates of increase of imports to the coun tries which do not produce cement has declined in recent years is not in any way connected to the growth of the cement industry in Senegal

B/CH.14/INR/117

Page 26

and Xigeria either. Although, in the past the Senegal industry had supplied, the neighbouring countries of Mali and Mauritania, this is not done to the same extent today. The cement, industries of "both Senegal . and Nigeria are in fact preoccupied with their respective home markets.

The quantities exported to neighbouring countries are negligible. For example3 between 1963 and 1965 inclusive Nigeria's export of cement was less than 2,500 tons. Senegal's exports are slightly higher and can account for 5-10. per cent of domestic production.

TABLE 2.8

Percentage Changes and Hates of Annual Increase of Cement Imports in

Country

Gambia Ghana Dahomey Guinea Ivory Coast Mali

Mauritania Mger Senegal Upper Volta Liberia Nigeria

Sierra Leone Togo

Sub-region

Sources Table

Percentage 1958-1964

+ 60,.

. +- 77 .. + 46)

-41J

+124) ) + 50)

+133}

_ j

+2?6OO^

' - 62" + I

-

+ 24 + 10

3.

West Africa

change

1949-1958

- 50 +254

+ 96

+233

+I85 +247

+150 +178

Annual growth

rate

1958-

12.3

9.9 6.5 (6.9)

14.4

7.0 15-.1

•»

1.1

(neg.

1.0 3.6 1.6

of ' 1964

)

)

j

) )

)

Annual rate of growth 1949-1958

(neg.) :•

15.1

7.8

14.3

12.3 14..8 10.7

12.0

E/CIM4/IHR/117

Page 27

51• The slower rate of increase in imports of the non-producing coun

tries and consequently of consumption in the years subsequent to 195^ .

is better explained "by trends in construction activities* For instance in Ghana3 a general slowing of the construction industry was evident in the period 1959-1963= Fluctuations in construction activities were also frequent in the smaller cement-consuming and non-producing countries after a "buoyant activity in the late fifties*--' Latest data? howevers seem to indicate that imports are again rising fast, especially in the . countries which account for the major share of imports; engo Ghana and .the Ivory Coasts

52. The traditional mvppliers of .imported cement to the sub-region are ■ France and the United Kingdom, These two countries still account for the major share of the supply of imported cement, However, since independence other countri-ss have also oome into the picture, notably Western Germany; Italy, and the Eastern European countries, The latter

countries do in fact offer cement at lower prices than either the tradi tional suppliers or their new competitors., But the countries of the sub- region cannot always take advantage of the lower prices in that in many cases the sources of construction investments having the character of bilateral aids or loans9 sources of supply of materials including cement are stipulated before liancU

53o Imports from African countries outside the sub-region are not usual eithezv -Even if occasional imports axe from such sources3 the quantities involved are of negligible orders* Thus the surplus productions of the Horth African countries have not succeeded to come in to the West African market to any notable degree thus far0

(ii) 'Trends of imports by value

54- The evolution of the value of imports in the period 1958-1964 *s

shown in Table 4 of the annex* The highest expenditure-on imports for the ''sub-region as a whole was recorded in I960 and amounted to just less than US$35 million» In subsequent years it fell steadily with-the

l/ Sees The Construction Industry in Development Programmes (b/CN»14/IHR/1O7)«

284

exception of"1964-when it showed a slight rise over the pr.ece.eding year*

The over-all -trend was largely dominated "by what took place- in Nigeraay/

GKana: and the Ivory-Coast, which have accounted for the largest of the, . sub-region's ■ expenditure on imports™ ■ -."".'

55'.' Nigeria*s share of imports fell dramatically from 42,7 P©1 oen^

in 1958 tol2»3 per cent in 1964s °n the other hand Ghana's share5 ■-

although it fluctuated somewhat in the intervening years? rose from

27,7 per cent in 1953 to 41,5 per cent in 1964. That of the Ivory Coast rose steadily from 8,5 per cent in 195& to 17,4 per cent in 1964° The three countries amongst themselves have? however5 accounted for a steady

70-80 per cent of the value of .expenditure of the sub-region1s imports,

in any year over the period 1958-1964= In other words, the decline in

the value of the imports of Nigeria has "been offset "by rises in the value of the imports of Ghana and the Ivory Coast.

(ii'i) The reiative^m2gjc^noe_of_jbh^^aj:uG^^ cement imports_

.56, The relative importance of the value of cement imports .to those

of construction mc/j-srids' in general are indicated in Table 2,9 "below with reference to the year 1963= Three "broad groupings in the relative

shares of cement imports to those of. construction materials could "be

identified. First, the lowest shares are indicated "by the cement-

producing countries of the sub-region (Nigeria and Senegal). Mauritania

with 6 per cent also falls in this group "but for a different reason.

The value of imports of construction materials for the mining industry especially iron and steel are singularly high in this country thus distorting the share of cement imports in the total picture. This is also true of Liberia, where the value of ir.ports of iron and steel products singly accounted for 63 per cent of the value of imports of construction materials in 1963*

57* . Secondlys the highest shares at 32 per cent are those of Gambia,

Dahomey and liger. The underlying reason is the opposite of what was

noted above for Liberia and Mauritania,, In other words, the share of

mmm

Page 29

TABLE 2,9

The Value of Cement Imports in Relation to those of Construction. Materials - 1963 -

Coun try- of imports of

construction materials including cement -

(million US$)

Percentage ratio Value of cement of cement to imports construction

(million US$) imports

Gambia Ghana Dahomey Guinea Ivory Coast Mali

Mauritania Senegal Upper Volta Liberia ■:- Nigeria Sierra Leone Togo

0.72 44.53 4.50

7-51 17-54 2.35

5.12 11.25 3.33 20,92

66.78 8.35 3.55

0.23

8.17 1.43

1.18

3.35

0.38, .0,29

0.60 0.60

2.47 5.56 1.25

0,79

32

18

32 16

19

16

25 5

18 12

8 15

22

Sub-region 197.70 26,60

14

Source; op.oit. Table 1.1,

a/ Materials included are non-metallic minerals,, iron and steel.products,

wood and derivatives, fittings and fixtures? electrical distribution materials? paints and varnishess and finished, structural parts.

cement imports emerges high because of the relatively low imports of other construction materials including in particular iron and steel

products.

58, Thirdly, the remaining countries fall within a group which could

be recognized as representing the typical relationship between the shares

of oement and construction imports. No major <iualifioations could be

Page 30■ ■

justified in this instance to alter the ratios shown in the table -

either in the sense of the factor of domestic production or the factors ' ...:,ofr excessive'-Under-and over-utilizations'of cement."" The ratios of the

share of cement to.construction imports fall within the narrow range

of. 15-20 per cent. Consequently, it is thought that this range represents the-importance of cement imports an relation to total imports of construc tion materials under the prevailing supply'structure of the sub-region.

...59.* It will, thus be appreciated that cement imports' occupy a high posi tion in over-all imports of construction materials. In fact for the majority of countries' of the sub-region, cement represents the second highest import item after iron and steel products among the seven groups of materials listed in the footnote of Bible 2,9O Evidently as more and more countries embark on the development of the cement industry, the importance of the' current level of cement" imports will decline. The levels^reached by Nigeria and Senegal indicate the objective to be

attained by the other' countries of the sub-region.

E- The Problem of Transports Costs and their Influence on Prices- 60, The transport and handling of imported cement in the countries of West Africa is a costly proposition. All the means of transport have.

high freight rates. Maritime transport, although the most suitable ■■■-'"' for "such a bulky material as cement, nonetheless, becomes costly due-^/ ""' .,t.Q ..high ..terminal- charges? the-underlying cause'being'the inadequacy '■ "

of port facilities., Goastal.,sea transport is ■ expensive 'because of the/

small volume of coastal trade. Almost all the important ports of the

•■sub-region.^Dakar, Abidjan,■.'Conakry, Terna, Lagos, etc.) are linked to the interior hy rail lines. - But only two of these cross State frontiers.

There is a conspicuous lack of feeder lines. Improvements to existing rail systems and east-west linkages, would have rationalized transport- ■ and reduced costs. Road transport, :which is reported to be -2-6 times. -

as expensive as rail transport, is the most widespread means of. distributing cement. Although slower than road and rail transport, river transport

is comparatively cheap. But' improvements to increase the navigable

lengths of-the rivers and thus reduce costs are overdue.

Page 31

61. .Terminal charges for rail transport are relatively smaller.than for sea transport and-still smaller for road transport- But for a normal density of. traffic? the cost of maintaining the rail and road systems ' considerably raise freight" charges oh these means of transport. Further high insurance rates5 import duties, commissions3 etc,' add significantly

to the total costs of supply. ... ■

62. The f.o.b, price" (Europe) of a. ton of cement is about-'US$10, But

by-the "time, this cement is delivered to the various markets in West'Africa?

its price would have trebled, quadrupled, etc, depending on where it is delivered. Two examples the one drawn from a coastal country, the other from a land-locked country demonstrate the composition of cement pricess

Composition of the price of cement at Lome

CIF price (Lome) ..;,.. ... = .... US$20,50

Port charges .« ... " 4*50

Chamber of Commerce ...« ,-.. " 0.81

■ Transaction- tax (15.7 per cent of o.i.fi) .•••.'•..». " '" 3-22 ';

Import Duties (ll per cent of o.i#f.) .'. " 2.26

Sub-total US$31e29

Other charges and commissions «,,.... -. ♦ " 3«95

Price ex-depot -HSl^i^a.

CompoBition of the price of cement at Niamey :

CIF price (Cotonou) , oo... US$2O.5.O

Port charges * .*.„... " 7.86

Transit charges o. <. " 4*86

Land transport Cotonou-Mamey o. •....» " 44*56

Import duties " 3.59

Other charges and commissions " 3.20

Price ex-depot ...

63« In..the. first example..which shows the- composition of -the price -cement

at Lome, over US$15 P©*1 "ton is added on the o.i.f« price "before'it is

delivered for distribution. The single most important expense are noted

Page 32

to be port charges-. But the preponderant influence of transport charges .is demonstrated by the second example. To transport the ton of cement'

from Cotonou to Niamey, a distance of some 1,000 km., the freight charge Is. noted to be more than twice the c.iflfa price of the oement at Cotonou,

Port and transit charges at US$12.72 are also substantial in thatthey

represent 62 per cent of the c.i,fn price.

64. ' The land-locked countries are thus particularly handicapped by the.

prevailing.■high costs of transport. Table 2.10 below shows the whole sale prices.prevailing in the main cement markets of each country of • the- sub-region.. The coastal countries enjoy prices'around US$30 per ■'■

ton-ex-depot. This is about US$8 more than the1, c.i.f. price- per ton.

TABLE 2,10

Wholesale price of cement-^

Country

Urban centre' Tear of quotation Price (US$ per ton)

Gambia, .Ghana

Dahomey Guinea.. . . Ivory Coast Mali

Mauritania Niger.

Senegal Upper Volta, Liberia Nigeria Sierra Leone Togo

Bathurst Accra Cotonou Conakry Abidjan

Bamako . ■ . . . Nouakchott Niamey Dakar

Ouagadougou .Monrovia

Lagos Freetown Lome

1965 1964 1964 - 1964 1964

.,. , I960' . ■■ ; .

1963

1963 1964 .1963 1964 1965 . 1964 1964

28 ..

28

41^ 36

30

-.. • ■■■..:-, .84 ■

49V

84

, .. ■ 22 .

.... 58

27

-,. .■ 32

28

35

a/ Quoiied ex-depot or "ex-factory.'

b/ Market price.

Page 33

It would be apparent from Table 2.10 that this margin varies. The underlying reasons are generally differences in tax structures and in port facilities. On the other hand in the case of the land-locked countries, wholesale prices fall in the range of US$60-85 per ton, i.e.

nearly three to four times the c-.i.f. price. Here the difference is mainly absorbed by transport costs- as was demonstrated with the break

down of the price of cement at liamey. -■

65. The prevailing high prices in the sub-region could in away be seen as offering incentives for the expansion of the domestic industry in that high transport and handling costs on imported cement could be visualized as acting as natural barriers protecting the local industries

from external competition. ' This, however, presupposes that the domestic cement industry could' operate on the basis of competitive costs of

'production and that in particular it could secure the advantages of

scales of operation*

66. ■ In this Chapter, the present supply structure, and its problem were outlined and the sizes -of the national markets of the countries of the .sub-region were defined. It now remains to...see what,.the future prospects

of- growth-.,of these markets are likely to be .and whether the markets ,of

-.the 'future would justify economic operations. , ■ ,.-,.- ■