Green route to developing Africa
Many assume that multinationals investing in developing countries abandon their environmental principals in the quest for a fast buck. But, on a recent trip to East Africa, Tom Idle was surprised to find cement giant Lafarge is going to extraordinary lengths to apply green principals in this dynamic emerging market
I re-read the sentence, a section of The Fuzzy Math of Eco-Accolades, an article I had stumbled upon in Business Week while killing time during the eight-hour flight to Nairobi, Kenya.
Yep. I had definitely read it right. "94.4M tonnes... more than Portugal."
A staggering statistic, but then there is no getting away from the fact that cement manufacturing is a dirty business, fuel intensive and carbon-emitting in a way that so few industries are. In fact, the industry is responsible for about 5% of man-made CO2 emissions.
I was travelling to Africa at the invitation of Lafarge, a French cement, aggregates and gypsum company. It is keen to show the western media how its sustainability efforts have stretched down into the developing world. Despite the apparent fuzziness of its eco-credentials, the company says it has a "proactive and radical policy to reduce CO2 emissions" and I was intrigued to see for myself what this meant - especially in a developing country. And so, I was on a whistle-stop tour of Eastern Africa, taking in manufacturing plants in Kenya's port town of Mombasa and in neighbouring Uganda, at the small, western settlement called Kasese.
Cement is ubiquitous. And no more so than in this part of the world - a region devoid of real infrastructure. The roads are appaling, potholed and crumbling at the kerbs. Well constructed dwellings are scarce, as are hospitals, bridges, pavements and offices. I could go on. Cement is needed for all these, and the sales of the product could be seen as an accurate barometer of the rate of development in emerging markets such as Kenya and Uganda.
The increase in sales of cement here is around twice the rate of GDP, as governments are keen to put in place basic infrastructure - the kind we take for granted in the West. Global demand for cement is likely to rise by 80% by 2020. It is predicted that growth is going to be five times faster in the developing world, although it's important to factor China into this equation - a country developing at the speed of a cheetah, compared with East Africa's slightly slower gazelle.
With this in mind, it's easy to understand why Lafarge would want to tap into the market here. In 2006, the company set out an ambitious plan to increase cement production by 45M tonnes by 2010, mainly in developing countries. Once this programme is complete, these countries will account for two thirds of the group's cement profits. Lafarge realised the importance of this market back in the 1980s, when it made a series of acquisitions in Kenya, South Africa, Uganda and Benin.
Then, on purchasing Blue Circle in 2001, it inherited operations in Zimbabwe, Tanzania, Malawi, Nigeria and Zambia. In sub-Saharan Africa today, the firm employs more than 7,000 people and has a third of the market share, accounting for 10% of turnover in 2006. Suffice to say, this is an important region for Lafarge.
But it isn't plain sailing. As with many African countries, a number of challenges need to be overcome. Electricity and fuel supply is unreliable. Logistics proves a real headache. The bulk and weight of cement means that production sites and markets need to be close to each other to maintain profits. In Kenya and Uganda, railways and good roads are few and far between. According to Lafarge, the general rule of thumb is that, for every 125 miles the cement travels from the plant, the cost doubles.
There is also the human resources issue of recruiting and developing qualified personnel from communities struggling to cope with HIV and malaria.
As I write, Kenyans are reeling from the tribal violence that erupted following an election tainted with vote-tampering allegations. Suddenly, this hopeful country could be sliding towards genocide. Although an extreme case, this is another example of the steep (almost vertical) challenges that exist in this part of the world.
In Uganda, my visit to Lafarge's Hima cement plant in Kasese coincided with the groundbreaking ceremony for a new production line that will double the plant's capacity to 780,000 tonnes a year. It was a ceremony attended by the rather paranoid and security-conscious Ugandan President, Yoweri Museveni, who was keen to meet with Lafarge chief executive, Bruno Lafont - but less keen to engage with the media.
The plant expansion - the construction of which is being carried out by a Chinese development company and should be complete by January 2010 - is important news for Uganda. Its economy has shown an impressive recovery since the late 1990s with regular growth of 6% a year. And the construction sector is one of the most dynamic in this economy. While agriculture struggled to increase by 0.13% in 2006, building and civil-engineering works leapt by 16%. To support this growth, the cement market is increasing in importance.
The plant currently serves the domestic market, as well as neighbouring Rwanda, Burundi and the Democratic Republic of Congo. However, the plant is isolated - more than 180 miles from the capital, Kampala. The power supply is temperamental - recent droughts caused problems with the supply, a large proportion of which comes from hydro-electric power. The company has now bought a generator to combat these issues, but the fuel for it has to be transported from the nearest port, Mombasa, almost 1,000 miles away.
Power problems have pushed cement prices through the roof in Uganda. According to Museveni, they are now two to three times the global average. Fuel costs are almost quadruple those in Kenya.
In a bid to cut the crippling costs and reduce emissions, Lafarge has taken a number of measures. First, it has started using an alternative to limestone in the cement-making process. Pozzolan, widely available in Uganda and with the same hydraulic binding qualities as limestone, is now being used. Crucially, it contains less CO2 than limestone.
Secondly, as part of a group-wide initiative to source alternative fuels, the Hima plant has begun using coffee and rice husks to help power the kilns that in some instances need to be heated to more than 1,400˚C to remove CO2 from the limestone. Coffee is produced in large quantities throughout the country, accounting for 50% of Uganda's total exports. So husks (the shells left over after the coffee bean has been extracted) are in abundance and are either landfilled or used as fertiliser.
The consumption of fossil fuels has been reduced by a third using this method and the project here is now in line to receive carbon credits under the Clean Development Mechanism. The programme cut emissions by 78,000 tonnes a year and, in 2006, saved the company £1.2M - an all-round success. No wonder there are plans to increase the proportion of biomass to 40% in the future.
In Mombasa the fuel cost issues at the company's Bamburi cement plant are less pressing. The same fuel powering the Ugandan operation travels just 5km to get to this plant. Nonetheless, biomass is being used here. Again, coffee and rice husks are the alternative, but more emphasis is placed on using tree plantations as the future energy supply.
Hundreds of thousands of trees are being planted on land owned by Lafarge, set aside for future limestone quarrying. The future-proof company owns hundreds of similar patches of land all over the world, I'm told. The trees, many Eucalyptus, will be seven years old when they are chopped down and burnt in the kilns. The scheme will not only reduce emissions (biomass accounts for 9% of the fuel being used by the plant), but the tree planting and harvesting is providing local employment for the surrounding communities.
After a brief visit to the Mombasa plant (a fascinating place where wild antelope roam freely between outbuildings and nobody bats an eyelid), we set off for Haller Park.
After two decades of excavation, the Bamburi quarries have been rehabilitated during the last 35 years. The result is Haller Park, a wonderful nature reserve, home to 180 species of birds, 15 large mammals (including giraffe), 400 indigenous plants (33 of which are endangered) and 17 types of bat. I wandered around, marvelling at the trees, butterflies, crocodiles, fish and gigantic tortoises, finding it almost impossible to get my head around the fact that this was once an exhausted limestone quarry. What has been created is truly remarkable: forest ecosystems, wetlands and meadows playing host to a plethora of natural wonders.
Lafarge seems very conscious of the nature of its operations: the extraction of natural mineral resources. Lafarge Ecosystems' website states: "Central to its success in the cement business, is an unequivocal understanding that Lafarge's capacity to repair the damage caused by its mining activities is its license to operate. Lafarge cannot turn its neighbours against it, it cannot soil its own nests, for then Lafarge would have no future." It's a good point, and one that has been well and truly addressed here. No trace of industrial activity remains, replaced with a haven for biodiversity. The site earned the Wildlife Habitat Council's International Award in 2006, a first for Africa.
On the plane home, I gazed out of the window at the thousands and thousands of acres of land, totally disconnected from one another with neither road nor rail. I felt positive about the effect a multinational like Lafarge - boasting a turnover of £12.6B a year - can have on a place like this. This part of the world needs roads. Without roads, development is going to be impossibly slow.
Criticism is commonly thrown at businesses like Lafarge. Its annual 94.4M tonnes of greenhouse gases is, quite rightly, a heavy feature of those criticisms. The good news is that Lafarge is on track to reduce its CO2 emissions by 20% per tonne of cement produced by 2010. And its absolute emissions are slightly down in developed countries.
The bad news, for the environment anyway, is that the firm is growing rapidly, particularly in emerging markets and its emissions are going up. "The climate challenge is to provide a model for emerging markets that is a combination of growth and emissions performance," says the company's vice-president for climate change initiatives, Vincent Mages. "There is no doubt that cement is part of the problem, but we want to be part of the solution as well," he adds.
And the company certainly has an important role to play here in Africa. It has the resources, infrastructure and economic might to significantly improve the economic and social stability of the states in East Africa. And what I was delighted to witness during my time here was the company's environmental and sustainability ambitions matching and challenging their economic ones.