The Competition Authority of Kenya (CAK) has given Simba Cement the approval to acquire Cemtech Company Ltd, the Indian cement firm based in West Pokot County.
Simba Cement will have 100 percent acquisition of the company’s assets including land, intellectual property, licenses, stock, equipment, business records, goodwill as well as third party rights.
Making the announcement, CAK said that there will be no change in market share considering that Cemtech had not started its operations.
“The proposed transaction is unlikely to lead to substantial lessening or prevention of competition in the market for production and distribution of cement in Kenya,” read a statement from CAK.
Through the acquisition, Cemtech will be resuscitated from its dormant state and it will create jobs while raising the economic outlook of the county.
For a while now, the firm had been hawk-eyed with county officials urging investors to quickly begin mining. The company was looking to mine limestone and clay deposits to produce clinker, which will now benefit Simba Cement.
“Its shareholders have been looking for a strategic partner to finance construction of a cement plant. The proposed acquisition is therefore expected to resuscitate the dormant firm, create jobs and raise the economic profile of West Pokot,” CAK said.
The assent comes not long after Cemtech announced that was ready to commence construction by moving equipment to West Pokot cement factory site.
According to Rajesh Rawal, Cemtech Chief Executive Officer, the firm had earlier this year obtained approvals for the commencement of the first phase of the 12 billion-shilling cement factory, marking a significant stride for the project that was long overdue.
Cement production from the site was expected to begin in two years since the factory was scheduled to be completed in about 18 to 20 months.
The assent was qualified as a merger and with Cemtech having no turnover for the previous year, to evaluate the transaction, its assets instead of turnover were considered.
“Premised on the fact that the transaction is unlikely to raise negative competition or public interest concerns, the authority approved the proposed acquisition of Cemtech Company Ltd by Simba Cement Company Ltd,” said CAK in a statement.
Currently, National Cement’s market share stands at 8 percent whereas its other competitors including Bamburi Cement, Mombasa Cement, and Athi River Mining Africa Limited, claims 33, 16, and 13 percent, respectively.
Savannah Cement and the East African Portland Cement holds 15 percent of the market share each.
Despite the seemingly tough competition between the companies, cement production and consumption in the country have maintained an inconsistently low trend for the past three years.
In 2018, the production dropped to 5.63 million tons from 6.2 million tons in 2017, which also represented an 8.2 percent decline from 6.7 million tons in 2016.
Consecutively, cement consumption decreased from 5.8 million tons in 2017 to 5.49 million tons in 2018. The consumption in 2016 stood at 6.3 million tons. The drop has been attributed to reduced demand in the construction sector.
Notably, the competition between firms and market changes have led to a reduction in cement prices. In 2018, the average price of a 50kg bag went for 605 shillings, which is a drop from the average of 687 shillings registered two years before.
Meanwhile, competition is also set to be tougher since Dangote, the Nigerian-based cement maker belonging to Africa’s richest man, has plans to open a plant in the country.