Savannah Cement to raise Sh40b on London bourse for clinker plant

Savannah Cement wants to raise $350 million (Sh39.7 billion) via a bond on the London Stock Exchange (LSE) to build a clinker production plant.

The firm has been relying on imported clinker - a component that makes up about 70 per cent of cement. It now wants to change this by building its plant.

Savannah Cement Chief Executive Samson Shivina told The Standard in an interview yesterday that the firm projects the plant to be completed by mid-2024.

“This is entirely being financed by a bond on the London Stock Exchange because locally, we may not find banks who are going to finance such size of the project unless it is a syndicate,” said Shivina.

“But the moment you put like five banks on the table, it takes longer for a decision to be reached. The announcement is supposed to come by the end of this month (January). The site works have already begun.”

Savannah, which started operations in July 2012, says the clinker plant will be based in Kitui and will have a capacity of 8,000 tonnes per day or 2.7 million tonnes annually.

The plant will dwarf that of National Cement or Mombasa Cement with an installed capacity of 4.3 million and 2.65 million tonnes per annum respectively, even though the two are also eyeing expansion projects.

Savannah will also use the money to set up a grinding plant of 700,000 tonnes per annum at the same place in Kitui to give it a competitive edge in serving North Eastern, South Sudan and Ethiopia.

Main competitors

The project will occupy 1,000 acres of land and will include infrastructures such as hospitals, schools, markets and a police station.

Savannah has a 42 square kilometre prospective licence.

All of Savannah’s four main competitors - Bamburi, East African Portland Cement, Mombasa Cement and National Cement - have their own clinker plants and several of them are planning to expand capacities

Imported clinker comes with challenges such as foreign exchange exposure, erratic fright charges and competition for vessels like last year when Savannah suffered supply disruption due to delays in shipment.

Kenya imported 0.924 million tonnes of clinker in the nine months to September 2021, down from 1.465 million tonnes in a similar period in 2020, data from the Kenya National Bureau of Statistics (KNBS) shows.

The value of the imported clinker was Sh5.6 billion, compared with Sh6.22 billion spent in the preceding similar period in 2020.

Savannah’s planned clinker plant comes amid calls for the government to increase import duty on the commodity from 10 per cent to 25 per cent to encourage local consumption.

Competitive trading

National Cement is planning to increase its clinker capacity by two million tonnes per year while Bamburi will expand its capacity by 1.6 million tonnes.

Others on expansion drive are Rai Cement (1.3 million tonnes), Karsani Ramji & Sons (one million tonnes) and Portland Cement (0.096 million tonnes).

But even as the race to increase clinker output hots up, Kenya Bureau of Standards is yet to come up with a standard for the material to enable competitive trading.

Cement consumption has been rising on the back of increased retail projects such as home construction and increased government projects such as the construction of Nairobi Expressway, the upgrade of James Gichuru–Rironi highway and the dualling of the Kenol-Marua road among other mega projects.

“With this being President Uhuru Kenyatta’s last term and keen to complete his legacy projects, we expect a lot of government spending in addition to the retail expenditure,” said Shivina.