Savannah Cement has bagged a multi-million contract to supply cement for the development of existing terminal and construction of another at the Jomo Kenyatta International Airport (JKIA).
The two year old, cement maker has been awarded exclusive rights to supply cement to support construction of one of the key vision 2030 project by Kenya Airport Authority (KAA) signaling tough times for major players in the industry.
Price of a 50Kg bag of cement has dropped to Sh 650, a 12 month low compared to the year 2009 when it was retailing at Sh 740 with analysts predicting intensified price wars for the commodity into the next year.
The recent development is expected to unsettle big players like Athi River mining (ARM), Bamburi and East African Portland Cement Company (EAPCC) that are banking on big government contracts to protect cannibalism to their market shares from new entrants.
Bamburi Cement has already announced venturing into real estate development to shield against an onslaught to its market share.
It is alleged that the three firms that also participated in the tender have since raised their complaints over KAA’s decision.
However, their recourse to KAA and Public Procurement and Oversight Authority (PPOA), Smart Investor has learnt fell into deaf ears- they have now resorted to the Competition Authority of Kenya (CAK).
Speaking on the sidelines of its customer dinner,Savannah Cement, Managing Director, Ronald Ndegwa confirmed one of the company’s major customers is undertaking the works at JKIA and has placed orders for the supply of cement.
But he did not disclose amount of tonnes and value of supplies to the two projects.
“Such an order placement does not in any way amount to an uncompetitive trade practice. We believe we were competitively selected for our high quality clinker specs and value product,” said Ndegwa.
According to Ndegwa, constructors of public projects are not bound to make their cement purchase from any supplier.
He said such a decision is made through a mutual commercial agreement as per specific technical requirements.
The cement maker with an annual production capacity of 1.5 million tonnes said it will break ground to the construction of Sh 8.5 billion clinker plant in Athi River early next year.
Similarly, it has announced its second miller will be built concurrently with the clinker to boost its production-the project is expected to take 18 months.
“With the clinker we will be better placed and cautioned from competition pressures,” said Ndegwa.
With its plan to completely retire 500,000 tonnes of clinker it imports annually, the company eyes massive savings of close to Sh 7.2 million each year.
Latest statistics by Kenya National Bureau of Statistics (KNBS) shows Cement production rose by 15.2 percent over the first nine months of the year to 4.24 million tonnes compared to 3.68 million tonnes a similar period in 2013.
Consumption grew by 19 percent to 3.69 million metric tonnes-similar to last year’s production capacity with the excess production this year coming from new entrants-Mombasa Cement, National Cement and Savannah Cement.