In a unique market strategy, Derba MIDROC Cement Factory, slotted to join the industry in a month, is to sell cement on a credit basis and provide delivery services. The factory, which has the capacity to produce 80,000ql a day, is to give 60-day credit to contractors who place a 50pc down payment and back up the remainder with an unconditional bank guarantee. This is not merely a one-time deal, as contractors can keep using it as long as the guarantee is in place, according to Haile Assegedie, CEO of Derba. “It is hard for people to get loans these days,” he told Fortune. “As long as the unconditional guarantee is in place, they can buy cement, paying half of the cost.” This is an offer that is open to individuals as well. Derba, 80pc of which is owned by Mohammed Al-Amoudi (Shiekh) and the remaining by MIDROC Ethiopia, is to give the service to employees, as long as the companies or institutions they work for put up similar guarantees. The total cost of the factory which includes construction of roads, installation of transformers is 600 million dollars. A large portion of it, around 408 million dollars, came from Al-Amoudi while 45 million dollar is being financed by the Development of Ethiopia (DBE), the International Finance Corporation (IFC), the financing arm of the World Bank, and the African Development Bank (AfDB). Bringing another new trend to the market, Derba, which was constructed at a cost 350 million dollars by China National Building Materials in a turnkey, is to deliver cement to clients within five days, to places located in 600km radius of Addis Abeba in the first two months. “We will expand our radius after that,” Haile told Fortune. “Our aim is to deliver to any place in the country.” This service is to be provided through 1,000 Volvo trucks, of which 750 have already arrived. The service is to be managed by Derba Transport Plc, a company that is under organisation. The trucks are being used to transport wheat that the government imported until the factory commences operations. Having completed its erection, the factory is now undergoing performance tests and is expected to start operations on January 14, 2012. Scheduled to inaugurate the company is Prime Minister Meles Zenawi. This is to be his first attendance at a MIDROC Group project inauguration and his second for all projects in the private sector. Previously, he attended the opening of Ayka Addis Textile & Investment Group, a Turkish textile factory, in May 2010. Derba’s scheduled entry into the sector comes at a time when the cement market is seeing an unprecedented trend in its price. It has decreased by 200 Br within a span of only three weeks. Dominated by two factories, the state-owned Mugher Cement and Messebo, owned by the Endowment for the Rehabilitation of Tigray (EFFORT), the market has seen a recent increase in supply. 
Part of the financing for Derba MIDROC, located 70km north of the capital in Oromia Regional State, came from DBE, IFC and AfDB in the tune of 45 million dollars. The demand for cement has for long surpassed supply, pushing the price up. In the past fiscal year, the 11 companies in operation were only producing three million tonnes a year, while demand stood at 11 million tonnes. However, expansion of Mugher and Messebo, along with new entrants, has pushed up the supply to meet the demand and even surpass it. There are currently 15 companies producing at a combined capacity of 7.8 million tonnes annually. This has prompted both Mugher and Messebo to write letters to the Ministry of Finance & Economic Development (MoFED) to stop financing the import of cement. The ministry has been financing imports to meet the demand of the various government institutions. Due to this, the price of cement has come down as low as 260 Br a quintal. But, the price is likely to go down further as the competition increases, according to experts in the construction industry. The shortage and price problems will be curbed, immediately, once Derba starts supplying the market, Haile said, declining to comment on how much their price will be. The entry of Derba and its marketing strategy is nothing to worry about, according to an official at Mugher Cement, which has the capacity to produce 1.5 million tonnes, annually. “There is enough market for both of us,” he told Fortune. “We also supply big government projects that require a lot of cement like the Renaissance Dam and are not worried about losing market.” However, Mugher, which opened up its doors to the public, recently, as opposed to giving priority to government projects, is changing its own marketing strategy, as well. It is conducting a study to identify distributors at the national level to expand its reach. “We are planning to have distribution to faraway places, such as Gambella, and widen our market,” the official told Fortune. The flexibility coming up in the market that has for a long time been rigid is good news to Makeda Solomon, a mother of two, who is in the middle of constructing a service annex. “I am really glad that this is happening, as it would mean I would be able to finish it under budget,” she told Fortune. “The added service of delivery is also very convenient.” With so much happening in the market, it remains to be seen how prices will react, once Derba enters with these strategies. | 
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