CONDITIONALITES
8.3.1 Output, price and supply
7.3.1.1 Cement
Cement is a crucial material in all- bUilding works (Spence, 1992). The explicit mention of Portland cement in Zimbabwe's building regulations as the binding material for building construction purposes has resulted in Portland cement being the main bUilding material on all building sites in Zimbabwe. Although the eany missionaries used lime successfully in the rural areas, its deliberate omission in statute books means that it cannot be legally used in Zimbabwean urban areas. Although cement is produced locally, the fact that one company produces it, Circle Cement Ltd., means that monopoly price tendencies are exercised. For example, figure 8.1 and table 8.5 of the study show that cement had the highest nominal price increase between 1990-1995 and 1990-2000 at 368.2% and 206.7% respectively
Fig. 8.1 Average cost of some building material in Zimbabwe 1988-2000
Source: CSO, 1993, pg 2; With *addltlons MucharambeYI 2000 survey data - . - Cement (one 50kg Pkt) _ _ abestos (roofing sheet)
5000 ---..- Burnt clay bricks Concrete hollow block 6"
4500 - . - Stone aggregates (one tonne) ___ River sand (one tonne)
I
4000 Building sand (one tonne) 3500
3000 2500 2000 1500 1000
500 - . A - - - - -
-
n.- ft ----=-==--fiO'4'/j"t~- . . --;~. - -- --Ifl ~
•
=4,C 't1988 1990 1991 1992 1993 1995 2000
..
Table 8 5 Rise in price of some building materials in Zimbabwe 1990-2000 in %
Materials 1990 1995 % Nominal 2000 %Nominal
increase increase
1990-95 1990-00
(ESAP)
Stone $1 00/8tonnes $89/8tonnes -11% $95/8tonnes -5%
Aggregate
Cement $7.50 $35 388.2% $230 20.7%
50kg
Clay burnt $450/1 000 $600/1 000 33.3% $4500/1 000 900%
bricks
6" hollow $1.40 $3.90 178.6% $15 971.4%
blocks
Pit $1 05/8tonnes $270/8 tonnes 157.1% $130 23.7%
Sand/tonne
River $95/8tonnes $340/8tonnes 257.9% $220 131.6%
sand/tonne
Source: MucharambeYI2000 survey data With 1990 price from CSO 1993, pg 15
The absence of a perfect, acceptable substitute under the country's building regulations means that Circle Cement totally controls the market in that respect. It is fair to say, however, that the reliance on electricity for cement production and the recent liberalised market prices for electricity contributed significantly to these price increases. In the absence of other fuel like natural gas and the prohibitively expensive, imported petroleum products, hydro-electricity is the chief fuel for Zimbabwean industries including companies producing construction materials. For example, electricity accounts for 75% (MPC&NH, 1986) of the total production costs for ZimTile. The monopolistic
status of the Zimbabwe Electricity Supply Authority (ZESA), in generating and supplying electricity in Zimbabwe leaves most Zimbabwean companies (shelter products producers included) at its mercy. For example, the introduction of a 50% "import surcharge" on electricity bills exceeding 1,000 kW/h monthly consumption rate in 1995, increased the cost of most locally produced goods in Zimbabwe. Cement manufacturing companies are greatly affected by such rises in the price of electricity because this added cost will eventually be passed on to the shelter consumers. Some Companies were pushed out of business with the ovemight 50% increase in the price of electricity, in addition to 20% excise tax and 17.5% Sales Tax (GOZ, 1997). It is no wonder that imports are costing much less than Zimbabwe goods and services.
Fig. 8.2 Total cement production and export figures by Circle Cement Ltd
400000 350000 300000 250000 200000 150000 100000 50000
0+----+----+---I----I---1~--_1_--~
1989 1QQn 1QQ1 1QQ? 1QQo:t 1QQ.4 1995 1996
-+- Total cement production - I f -Exports -+-shelter
Source: Monthly bulletin of Statistics, 1997, pg 56 *Additions Mucharambeyi 2000
As the conditionality of industrial policy rightfully intended that companies should be export orientated, the study showed that Circle Cement exported 14% (fig. 8.2) of its production. Also illustrated on figure 8.2, an average of 20 000 tonnes of cement went into domestic shelter market during the period of ESAP (1990-1995). Table 8.7 shows the percentage of exported cement to the SADC countries.
Table 8.6 Circle Cement Ltd. export figures in the Southern African region
Country Tonnes %of Exports
Malawi 11,247 39
Burundi 8,513 29
o
RCongo 4,447 15Tanzania 3,416 12
Namibia 660 3
Mozambique 361 1
South Africa 282 1
Total 28,926 100
Ideally, under circumstances of reduced cement demand, the price of cement should have been falling or have fallen. The rises in prices of other inputs have prevented this from happening. It is very common to see informal traders selling cement bags by the roadside below the retail price in most established hardware shops. For example, the factory price at Circle Cement Ltd was $220 for a 50Kg bag of cement. The study found that on average, most formal traders in Mutare were selling the same bag at $230 and the informal sector average price was $225. Most informal traders were willing to negotiate the sale and lower the price. Unfortunately however, we noted that most informal sector traders did not keep their cement in dry and sheltered conditions. The quality of their cement cannot therefore be guaranteed to be of good condition Obviously, competition between the formal sector businesses and the informal traders to the advantage of the consumers. The competition keeps the prices down. However, the failure by the Government to tax the informal sector means that government is losing Millions of ZimOollars in uncollected company and income taxes, at a time when the government badly needs this money to finance other programmes.
Undoubtedly, prices could come down if there is transfer of technology and development into the hands of the informal sector. This will bring increased competition and also result into the creation of employment and community empowerment, which is in line with the ESAP aims and objectives. Spence (1992) observed that Indian technologists have been experimenting with mini-cement plants since the 1960s in an attempt to develop a process for producing cement of identical quality to that of the developed world. However, they use equipment at local scales without involving transitional capital.
This kind of entrepreneurship taken into the Zimbabwean context would help the informal sector achieve higher productivity. With the support of Scientific & Industrial Research & Development Centre it would be easier to achieve such levels of technological development.