Maputo — Seven of the 16 cement companies operating in Mozambique have called on the government to keep the price of cement high.
These companies signed a letter to the Minister of Industry and Trade, Carlos Mesquita, protesting at what they called "the very low prices" charged by the Chinese-owned Dugongo Cimentos, a new entrant to the Mozambican cement market.
The letter, circulating widely on the Internet, claims that Dugongo's prices are seriously damaging the business of the other companies and constitute "unfair competition".
It says that, when Dugongo began operations in March, its prices were slightly lower than those of its competitors, but then Dugongo dropped its prices by almost 50 per cent. "They want to remove all their competitors from the market", the letter complained.
The users of construction cement, it adds, have stopped buying from other companies, and are waiting for further price reductions from Dugongo.
Dugongo also happens to be the sole Mozambican producer of clinker, a key raw material for cement. The other companies thus have to buy their clinker from Dugongo, or import it.
The letter claims that Dugongo is violating Mozambican legislation on competition, and ends with a call for government intervention. Dugungo's practices, it alleged, are "restricting competition", because it is "practically impossible" for other companies to compete with Duugongo's prices.
Dugongo was guilty of "abusive practices", the other companies accused, "because it drops cement prices as it likes", and because its position as the sole producer of clinker, means that all the other companies are dependent on it.
The letter calls on the government to fine Dugongo, and "to act immediately to stop this brusque fall in the prices of cement". It calls for "a general consensus on clinker and cement prices" - in other words the companies want the government to override the free market and fix cement prices.
The largest cement company in the country, the Portuguese-owned Cimentos de Mocambique, did not sign the letter. Apparently it does not feel threatened by Dugongo.
According to Friday's issue of the independent newssheet "Mediafax", some of the companies that did sign do not actually produce cement. They merely buy it from other companies, bag it, put their own labels on the sacks, and sell it at high prices.
Judging from the avalanche of comments on Mozambican social media, the consumers are overwhelmingly in support of Dungongo and opposed to the cartel formed by the other companies. For years consumers have complained that the unofficial cement cartel has kept prices artificially high, and so are overjoyed that a new company is breaking ranks and cutting prices.