Savannah Cement ups rivalry with Sh37b Kitui clinker plant

Savannah Cement has contracted a Chinese firm to construct a $300 million (Sh36.8 billion) clinker and cement plant in Kitui County.

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

In a statement yesterday, Savannah Chairman Benson Ndeta said the firm had contracted Sinoma International Engineering, a Chinese company with a presence in over 70 countries, for the project.

Sinoma International is one of the largest cement factory contractors in the world and recently also bagged a contract for the expansion of Dangote Cement in Nigeria for $500 million (Sh61.4 billion) and MIDROC Cement in Ethiopia for $282 million (Sh34.6 billion).

Savannah's project, to be located in Mwingi North, will begin immediately and take approximately two years to complete, giving an edge to the firm, which started operations in July 2012.

Savannah's announcement comes months after the firm told The Standard that it was seeking to raise $350 million (Sh442.9 billion) via a bond on the London Stock Exchange for the project.

Mr Ndeta said the project involves the building of the plant with a capacity to process 8,000 tonnes of clinker per day together with a 2,400 tonnes cement-grinding plant, a 35 megawatt (MW) captive power plant, 13MW waste-heat recovery system and associated infrastructure and amenities.

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The plant will dwarf those of National Cement and Mombasa Cement with an installed capacity of 4.3 million and 2.65 million tonnes per annum respectively although the two are also eying expansion projects.

The project is expected to employ about 5,000 workers during construction and a further 10,000 upon completion.

"We are happy to firm up this contract to deliver the most modern and state-of-the-art production factory for our operations in Kitui County. The plant will crush locally available limestone to clinker in addition to a 100-tonne-per-hour cement grinding plant," said Ndeta.

Savannah plans to replace fossil fuel-based power requirements with a combination of solar power and thermal recirculation within five years of initial clinker extraction as it seeks to support the sustainability agenda.

The plant is designed to use appropriate carbon capture technology to completely remove or materially reduce its carbon footprint within 10 years of commencement, according to Ndeta.

Savannah's carbon mitigation strategy is part of a 10-year environmental, social, and governance investment programme valued at between $50 million (Sh6 billion) and $100 million (Sh12 billion).

The project will occupy 1,000 acres of land and will include infrastructure 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 freight charges and competition for vessels like last year when Savannah suffered supply disruption due to delays in shipment.

Kenya in the six months to June this year imported clinker valued at Sh4.74 billion compared with Sh4.31 billion that was spent in a similar period last year, data from Kenya National Bureau of Statistics shows.

Savannah's move 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.

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

Others on the 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, the Kenya National 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, including construction of the Nairobi Expressway, the upgrade of the James Gichuru-Rironi Highway and the dualling of the Kenol-Marua Road.