Interview: Salim Kaddouri
What are the main drivers of growth in the construction sector at this time?
SALIM KADDOURI: As an emerging economy, Gabon’s public infrastructure segment presents the best opportunities for growth given the number of roads and bridges remaining to be built. Unlike more developed economies, countries such as Gabon should consume around 500-550 kg of cement per capita per year, yet the number falls short of its target, reaching only 378 kg. Of course, we are currently facing headwinds from the current economic downturn, driven by the fall in commodity prices, but opportunities still remain. Regions such as Franceville, Port-Gentil and a good portion of the inner country remain isolated, and we are seeing a real drive to connect them to the existing network. Given the current housing deficit, we also foresee a lot of opportunities in real estate.
How would you assess the major challenges facing the producers of construction materials?
KADDOURI: One of the challenges is transport. Despite recent improvements, the road network inside the country is still not suited to provide a stable transport route all year round, especially during the rainy season. Additionally, the lack of competition in both rail and maritime transport results in higher costs for consumers. Another factor driving high prices are the costs of inputs. Gabon is an expensive country, and therefore energy, labour and raw materials are also expensive. Keep in mind that cement producers do not aim to make huge margins – between 5-15% is sufficient – but our operational costs remain very high. A solution would be to produce clinker in-country, as was the case in 2014, or at least import it from neighbouring countries.
We are studying the attractiveness of each market in the region, to see where to start clinker production ourselves. We would also like to reopen our aggregates production plant in Gabon. Labour laws should also be made less stringent, and aim for an equilibrium between safeguarding jobs and allowing industries to develop. Nevertheless, we have made great strides in lowering the cost of the product since our arrival in Gabon, and were able to achieve a price which is actually lower than that of imported cement.
This brings us to our next challenge, which is imports. As the sole cement producer in the country, we have reached 53% market share, up from 25% two years ago. However, this only allows us to operate at 50-55% capacity, which is still not enough to operate at sustainable levels. To remedy this, our factories need to operate at a minimum of 85-90% capacity, and only a 90-95% market share can get us there. We are not asking to prohibit imports altogether, but we are seeking additional barriers to grant us breathing room and help us preserve jobs. An investigation by the Ministry of Commerce at the level of Customs discovered several misdemeanours concerning deflated declarations. Up to today, there remain some pockets of resistance, which we are still incapable of stopping, but we will continue our collaboration with the government and other industries to make these people operate within the confines of the law. In a small market such as Gabon, local industries must be protected to maintain growth and safeguard employment.
What is the industry’s potential for export?
KADDOURI: At full capacity, CIMAF and Cimgabon together have a capacity of 920,000 tonnes for a local demand of 700,000 tonnes. However, the main factor driving exports is competitiveness, especially regarding prices. We have a plant which stands idle in Gabon’s third-largest city, Franceville. Surprisingly, road infrastructure to northern Congo is better from Franceville than from Brazzaville. From Gabon’s fourth market, Oyem, we can also export to Equatorial Guinea, which has recently experienced a construction boom. São Tomé is also a potential option.
Read More from OBG
