CAIRO: All new cement companies who will receive licenses after Sunday’s tender will be encouraged to increase the domestic component used to establish their cement factories, the Ministry of Trade and Industry announced.
All new factories will be required to use a minimum of 20 percent domestic components. By doing so, the 14 new cement lines will contribute LE 4 billion of their investments to the government. Companies that use over 20 percent will be granted privileges by the ministry.
“The cement factories that use more than 20 percent domestic components in their facilities will be given privileges in the form of a discounted license fee, Minister of Trade and Industry Rachid Mohamed Rachid said.
For example, if a factory uses 25 percent domestic components, they will be given a five percent discount on their license fees.
Adopting this strategy will increase the capacity of the Egyptian industry, encourage new industrial technologies, as well as create 40,000 new job opportunities.
“The ministry is using a wise strategy to encourage the new cement companies to use domestic components, it will definitely work, Medhat Selim, an associate at HC Securities and Investment said.
Analysts expect that the privileges will encourage new cement factories to use a minimum of 35 percent domestic components, providing an average of LE 7 billion of their investments to the government. If these expectations are met, 70,000 new job opportunities will be created.
“Decreasing the license fees will attract investors to stretch their limits and use as many Egyptian components as they can, Selim added.
These decisions are being made while the Egyptian Competition Authority (ECA) investigates nine cement companies for monopolistic and anti-competitive practices. Since then, cement prices have stabilized to range between LE 350 to LE 365 per ton.
According to the ECA, the public prosecutor will start calling in the cement company representatives and their legal commissionaires to give their testimonies.
The increase in the number of cement companies is expected to stabilize cement prices in the market, as supply levels with demand. The new companies are expected to produce 19-20 million tons of cement annually within the next five years.
