A new US$140 million investment designed to boost the local supply of cement in East Africa and promote infrastructure development has been announced today by CDC, the UK’s development finance institution.
CDC is investing in ARM Cement Limited (“ARM”), a producer of cement, lime and fertilizer, with operations in Kenya, Tanzania and Rwanda. CDC’s capital will help the company develop its existing business and to potentially expand its operations into neighbouring countries.
ARM, which operated under the brand name Rhino Cement, is one of East Africa’s leading cement manufacturers, producing 2.7 million tonnes a year and employing 3000 people. CDC’s long-term investment is designed to help strengthen ARM’s financial structure and to help the company develop to meet the growing demand for sustainably produced cement across sub-Saharan Africa. In the short-term, CDC will support the company’s plans to expand cement production in Mwingi in central Kenya, helping to bring down the cost of cement to customers based away from the traditional coastal producers.
CDC’s investment will enable ARM to boost its production capacity and create new jobs. The supply chain of SMEs that transport the company’s raw materials and provide general services will also benefit economically from the company’s growth.
“CDC’s investment in ARM Cement can provide the building blocks for the growth of infrastructure and housing in East Africa. This investment will strengthen a company making a difference to the local economy, bringing jobs and lower cost raw materials to a region traditionally dependent on imports. ARM has the potential to become one of sub-Saharan Africa’s most successful companies, providing a platform to expand into neighbouring countries while bringing world-class environmental standards and highly efficient plant – an approach that is central to CDC’s investment strategy“
“This is a significant milestone for in ARM’s journey. We chose CDC as an investor and partner to help us achieve a shared vision of creating the leading and lowest-cost East African Cement business. Together we will focus on shareholder value creation and on positive developmental impacts for our communities and stakeholders.”
CDC will work closely with the company to enhance standards in areas such as energy efficiency, health and safety and its engagement with local communities, in particular supporting the company’s excellent provision of health, education and environmental services to local people. CDC will also support the company’s move to membership of the World Business Council’s Cement Sustainability Initiative, which will result is reduced energy costs, lower greenhouse gas and dust emissions and improved water conservation and recycling.
Founded in 1974 by HJ Paunrana, ARM (formerly Athi River Mining Ltd) is now led by his son, Pradeep Paunrana, the current Managing Director and CEO of the company. The company has grown from modest beginnings into East Africa’s second largest producer of cement, with a market share of roughly equivalent to a 15 percent market share. Cement consumption in Kenya and Tanzania has grown at a rate of around 12% per year, as both countries’ economies grow.
This is CDC’s first direct investment in the cement industry in Africa since the launch of its new investment strategy in 2012. Ketso Gordhan, CDC’s Head of Africa, will be CDC’s representative on the ARM board. He brings extensive Pan-African cement industry expertise. CDC has a long history of backing the industry dating back to one of its first investments, Chilanga Cement in Zambia, in 1948. This is CDC’s second investment in Kenya in as many weeks following the announcement of its acquisition of a 10.7 per cent equity stake in the Nairobi-headquartered banking group I&M Holdings (“IMHL”).