Africa-Press – Namibia. Namibia finds itself in a delicate position, where cement supply outweighs demand or market.
This is according to the country’s largest cement manufacturer, Ohorongo Cement, which remains adamant that the domestic market, in its current form, is not large enough to sustain two cement manufacturers.
The reasoning is that Namibia currently has demand for about 600 000 tonnes of cement annually but has the capacity to produce some 2.5 million tonnes per annum, which means there is a significant overcapacity to the local market.
This situation is exacerbated by the fact that cement is a low-value, high-volume product that attracts huge logistics costs. What is more, the inability to export cement within southern Africa, due to border closures in Angola and import bans in Botswana, Zambia, and Zimbabwe and economies of scale in South Africa, has resulted in general regional overcapacity.
Moreover, the Namibian Competition Commission (NaCC) recently prohibited the acquisition of Ohorongo Cement, whose majority shareholding is held by German cement conglomerate Schwenk Zement, by the Chinese-owned cement manufacturer Whale Rock Cement, citing a concern for competition in the market that could also ultimately lead to a loss of jobs.
The NaCC assesses each proposed transaction in the context of specific market conditions, ownership structure, and public interest outcomes.
Monopoly
The NaCC said its decision was based on the grounds the proposed transaction would create a monopoly that would virtually eliminate all competition within the sector. The NaCC explained the proposed merged entity would be able to “act independently of market forces, with the likely outcome being higher prices, reduced output and quality, and limited choice for downstream customers with negative ripple effects on the entire value chain, including but not limited to increased cost of housing and infrastructural projects and the economy at large.”
Speaking exclusively to New Era this week, Ohorongo CEO Hans-Wilhelm Schütte pointed out that cement production is capital intensive and warned that overcapacity in a market such as Namibia’s can be economically detrimental.
“It is a reality that, over time, the market may only support one major producer. It is also important to consider the market in a broader Southern African Customs Union (Sacu) context, rather than defining it solely within Namibia’s borders. Export potential should form part of the competitive landscape,” Schütte stated.
He further emphasised that Ohorongo Cement has never operated without competition.
“Even during the period when infant industry protection was in place, exemptions were granted, such as those to Jacks Trading, and Whale Rock Cement was later established. Ohorongo welcomes fair competition, provided all industry players are held to the same regulatory standards.” Schütte added.
According to Schütte, any structural changes in the domestic cement industry should ultimately support Namibia’s economic growth, safeguard jobs, and ensure a stable and high-quality cement supply. Also, he firmly believes a healthy, sustainable manufacturing industry in Namibia is important to ensure continuous operations for generations to come.
“We recognise the need for healthy competition and trust that the NaCC will always make a decision based on thorough economic analysis and in the best interest of Namibian consumers. It is also important to consider the market in a broader Sacu context, rather than defining it solely within Namibia’s borders. Export potential should form part of the competitive landscape,” Schütte stated.
He said while Ohorongo Cement respects the insights and past decisions of the NaCC, it also observes that public sentiment appears to have shifted. Schütte said this is evidenced by broader engagement during the recent consultation process.
Schütte continued: “In the past, local ownership interest was virtually absent, whereas today, this is receiving increased attention. The current situation is simple: “One factory would close, and a foreign investor would simply be replaced by another one. The future remains uncertain, and we await further guidance from Schwenk following the upcoming board discussions.”
Local ownership in Ohorongo Cement is held by the Development Bank of Namibia (DBN), and Schwenk Namibia has actively sought local investors, appointing stockbroking firms Cirrus Capital and IJG to explore investment opportunities. However, Schütte said no viable local partners have yet been identified.
“Ohorongo Cement supports efforts to increase local participation in key industries and remains open to any recommendations that further Namibia’s long-term development and empowerment objectives,” said Schütte.
Inclusivity
Commenting on previous unsuccessful Ohorongo merger attempts, of which there have been six, Schütte said these experiences underscored the importance of transparency, regulatory alignment, and inclusive stakeholder engagement.
“Schwenk Namibia has taken previous feedback seriously and remains committed to ensuring that any future partnership or sale meets Namibia’s economic and regulatory expectations, including local participation where possible.
“Ultimately, overproduction in a small domestic market is unsustainable, regardless of the industry, but especially so in the cement industry, which is very capital intensive. It is critical that the government also play an active role in facilitating access to export markets, which would strengthen the sector and create much-needed employment,” Schütte continued.
Meanwhile, the NaCC noted that in addition to the likely anti-competitive effects of the proposed merger, there is a real risk a post-merger strategy could be employed to diminish fiscal contributions currently realised by the government, thus undermining public interest outcomes in the long term.
During February this year the NaCC received a merger notification regarding Whale Rock Cement’s proposal to acquire 100% of the issued share capital in Schwenk Namibia. The proposed transaction entailed acquiring ownership of Schwenk Namibia from its parent company, Schwenk Zement International GmbH & Co.
Schütte explained that Ohorongo Cement’s commitment to environmental responsibility remains central to its operations.
“While future ownership may influence strategic direction, we believe the business case for sustainability is clear. Through initiatives such as biomass, woodchips, charcoal fines, and Refuse Derived Fuel (RDF), we have not only reduced carbon dioxide emissions but also created employment in new sectors. We trust that any future owner will continue building on this foundation,” Schütte stated.
Ohorongo Cement remains one of the few companies in the country that adds 100% value addition to raw materials.
While foreign direct investment (FDI) plays a critical role in Namibia’s industrial development, including the establishment of Ohorongo Cement, Schütte has questioned the difficulty for Schwenk, as a foreign investor, to sell its shares in Namibian investment.
“If foreign investors are later unable to sell their holdings, it could deter future FDI not only in the cement sector but across the broader economy. A healthy investment environment requires clarity, predictability, and the ability to exit when appropriate; otherwise, you lose investor confidence,” Schütte stated.
In an independent analysis of the domestic cement industry, economist Klaus Schade said overcapacities could eventually force companies out of the market. “Hence, a second cement plant is not likely to increase the overall benefits of cement production to the economy in terms of contribution to GDP, the balance of payments, and the labour market,” Schade said.
For More News And Analysis About Namibia Follow Africa-Press
