Tanga Cement Company, says its future expansion will be expensive because of the extended power rationing and growing competition from imports from Uganda and Kenya.
The cement manufacturer is also undertaking a study to install its own source of power in the wake of frequent power blackouts that are affecting its operations.
The company chairman Dave King, said, We are directly affected by the quality and quantity of power supplied and by our own power generation to supplement Tanesco's supply.
He said the unreliable railway services had also affected the company's supply chain, especially to the mining Lake Zone area, which has recently seen a boom in construction as huge investments are made on the gold mining sector.
Tanga Cement said it cannot effectively service this market because of logistical problems. We are already feeling the effect of this in the Lake Zone where we are seeing increased importation of cement from Uganda and Kenya, said Mr King.
Speaking just over a week ago, Mr King expressed optimism that the company will continue with its modernisation programme.
Tanga Cement produced almost 350,000 tonnes of cement in the first six months of this year. Mr King said turnover increased by 19 per cent while sales stagnated at 4 per cent increase. However, its capacity expansion will have to seriously consider the transport network and supply. Mr King said the company was in the final stages of acquiring its own locomotives to stop reliance on the public railway transport in the Lake Zone area.
He was he was restating a position the company announced last May when he said the company's transport problems would soon be over. It had placed an order for locomotives from Spoornert of South Africa. Nevertheless, he was still assessing the impact of the recent privatisation of the Tanzania Railways Corporation.
The large-scale mines are the major consumers of cement from Tanga Cement.
According to Tanga Cement managing director Jurg Fluhmann, sales of cement in the Lake Zone have dropped from between 12,000 and 14,000 tonnes a month in the recent past to a mere 3,000 tonnes.
The construction of Tanga Cement started in 1978 and the plant was commissioned in July, 1980. It is a dry process plant with a four-stage suspension pre-heater capable of producing 500,000 tonnes of clinker per year. The company was privatised in 1996, with Holcim Ltd acquiring 60 per cent of the shares and the government retaining 40 per cent.
It went public in 2002 with Holcim taking 62.5 per cent shares, the public holding 32.5 per cent shares and Tanga Cement employees owning shares.
However, company ownership has changed slightly with current ownership seeing Holcim Ltd retaining 62.5 per cent, general public 35.4 per cent and 2.1 shares per cent going to employees.
The company will also increase its packing capacity to 325 from 205 tonnes per hour, following the installation of a new equipment. The $1.5 million machine will be commissioned in two week's times, bringing to three the number of packing machines at the plant.
Mr Fluehmann said last week that the new packing machine has a capacity of 120 tonnes per hour. With a production rate of 16,000 tonnes of cement a day, Tanga Cement pays the Tanzania Electricity Supply Company (Tanesco) about Tsh400 million ($300,000) a month in power bills. It however spends four times higher when it uses its own generator of 5.4 MW during power rationing.
Last year, the company had 148 power interruptions, which reduced its production capacity. However, the factory has not been able to fully utilise coal from Kiwira Coal Mines Ltd to fire its kiln due to high concentration of ash content and poor supply. Benedict Lema, the plant manager said last week that supplies from Kiwira Coal Mine were so low and could not satisfy its 220 tonnes per day demand.
Kiwira also supplies the Mbeya Cement Company Ltd with 200 tonnes of coal per week. Unless the coal exploration at Kiwira is improved to minimise the ash content and increase supply, its not reliable, said Mr Lema.