Why Dangote Cement is considering shutting down its Ethiopian factory


One of Africa’s largest cement producers, Dangote Cement Plc may shut down its cement factory in Ethiopia if the company is unable to resolve its issues, in the state of Oromia where it operates. The state had ordered it to surrender parts off its operations to indigenes, in order to reduce unemployment among youths. The company had declined to do this, citing the need for quality controls.

While some may consider Oromia’s demands as excessive, they are common place in Africa and even Nigeria where Dangote cement started operations. The issue clearly shows that the company did not go into a memorandum of understanding with the host community before starting production. Signing up such agreements, prevents disruption of operations, and gives a sense of inclusion. The move could also be a hostile one that is prevalent among communities where foreign companies operate. The company was among several attacked last year by the Oromo community.

Dangote cement will now have to go into negotiations with the community and provide other incentives. These will add up to cost of production and thus reduce the profit margin of the company. The new policy has led to the company putting a halt to expansion plans for the factory and other investments it was considering in the country. About $700 million has been spent so far on the factory. Communities in other countries the Dangote group has operations may decide to tow the same line in order to extract benefits from the firm. The company may have to draw up a community engagement policy for all its operations outside Nigeria before commencing any new projects.

Data from its 2016 annual report, show the company’s African operations are yet to turn a profit , after stripping away tax holidays. Dangote cement was established in 2002, and currently operates in 12 countries in Africa. The company is scheduled to begin operations in Sierra Leone within the year. Shares of the company closed at N204.98 on the Nigerian Stock Exchange (NSE) and are up 17.4% year to date.

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