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Derba Midroc Cement Project
The booming construction activities in Ethiopia has led to the growth of the cement industry in the country. In 2011 Ethiopia imported around 1metric tons of cement. The government eliminated stopped this on 27 March 2012 when it banned imports in order to protect upcoming domestic cement production.
The market is characterized by logistics and custom procedures that are costly, inadequate and inefficient according to a presentation on the sector made at the 7th Africa Cement Trade Summit .
...It was not uncommon for construction projects to be delayed by as much as a year or two due to cement importation restrictions. Companies are also experiencing frequent power interruptions, limited access to funding, as well as shortage of Human Resource trained in cement technology and management. In addition to frequent electricity supply interruptions, companies are having to use expensive imported energy – Heavy Fuel Oil and coal, because of the limited options of power.
Today, with an installed production capacity of 8,000 tons a day, Derba MIDROC is helping meet 100% of the country’s cement needs, and exporting to nearby countries.
The Derba Midroc Cement project
The DMC project consists of a green field cement plant in Ethiopia to develop the Derba-Muger limestone deposit located 70 km north of Addis Ababa. The objective was to build and operate an integrated cement plant with capacity to recover 5,600 tons per day clinker and produce 7,000 tons of cement per day as a finished product, or an annual production of 2.5 million tons. The deposit contains 165 million tons of limestone, with an estimated project life of 60 years.
Located in Derba, a region with limited economic activity other than small-scale agriculture, the DMC’s large-scale plant aims to reduce cement price and to develop the Ethiopian industrial base and transform a local low-value raw material into high-value cement.
A US$350 Million Project
The plant was built by the MIDROC Ethiopia group owned by Cheick Mohammed al-Almoudi, the project sponsor and main shareholder of DMC. Co-financing was provided by the European Investment Bank (EIB), the International Finance Corporation (IFC) and the African Development Bank (AfDB). In this project, the Bank played a lead arranger role by detailing financial, economic and stakeholder models that were presented to sponsors, lenders and the country’s central bank.
The total cost at inception was US$350 million with AfDB providing a long term senior loan of US$55 million. Furthermore, the Bank provided assistance by undertaking and preparing environmental management, assisting stakeholders with industry best practices and making key recommendation to authorities in order to improve the business environment.
A regional catalytic
The project covered the development and upgrade of supporting infrastructures: Roads, power transmission line, water pipelines and social amenities. Due to its high-power consumption, a 5 MW plant has been built by the sponsor during the construction phase, making 40% of its energy available to the local community. The plant also played a key role in local cement supply with a 75% drop of price which had a positive effect in the construction sector, especially with the reduction of cement import dependency. The project created about 2,000 jobs during construction and presently employs 739 permanent workers of which 17% are females.
The project had a catalytic effect on regional development with the establishment of a local township for workers and communities providing basic services including schools, a hospital, primary healthcare facilities and training for local SMEs. In addition, a dedicated community development has been set up by the company to support local businesses.
“In the past you could never really tell when a project would be completed. It was normal to always double the amount of time required to complete a project,” Said Samuel Teklay, Satcon Construction CEO and MidRoc Client, a leading employer of labour in Addis Ababa.
“Our company has had an exponential impact on the local economy and the construction industry in general. People no longer have to wait for months or years for cement. Now, we deliver to a client’s construction site within 24 - 48 hours” Haile Assegide, Derba MIDROC’s CEO.