Africa’s Richest Man, Dangote Faces Challenges In Tanzania, Shuts Down Cement Plant

Africa’s richest man Aliko Dangote has shut down his cement plant in Tanzania due to high energy costs and a technical glitch at the $500 million factory, according to a government source, who confirmed reports in Tanzanian media.

Executives at Dangote Industries Tanzania have recently complained about the government’s failure to provide the company with cheap fuel and other logistical solutions. Dangote Cement had previously requested the government-owned energy company, the Tanzania petroleum Development Corporation (TPDC), to supply its Mtwara-based cement plant with natural gas at significantly subsidized prices – a request the government body turned down.

Dangote cement spends as much as $4 million on diesel every month powering its cement factory.

“Our plant uses six million liters of diesel per month to run generators after the promises to supply it with natural gas, which is produced in a nearby gas field, failed to materialize,” Dangote Tanzania CEO, Harpeet Duggal, had told a group of politicians in October.

Dangote plant was strategically built in Mtwara, in Tanzania’s southeastern region, to take advantage of cheap natural gas that is extracted in nearby fields. While the previous government led by former President Jakaya Kikwete had promised Dangote cheaper prices for natural gas, the TPDC under the government of President John Magufuli has refused to honor the agreement.

In a bid to mitigate its energy costs, Dangote Industries has resorted to importing coal from South Africa, which is cheaper than natural gas – a move that has greatly upset top government officials in the Magufuli-led government, primarily because Tanzania also possesses substantial deposits of coal.

In August, the government banned the importation of coal from South Africa – a move that pundits believe was specifically targeted at Dangote.

The Tanzanian government has repeatedly requested that the cement behemoth source its coal locally, but Dangote executives have complained that the coal, which is mined from Songwe region, hundreds of kilometers away from Mtwara, is of poor quality and unreasonably expensive.