The effects of competition on cement prices and the productivity of cement producers in Ethiopia

M.Phil. (Industrial Policy)Abstract: Cement is a significant product for economic development in Ethiopia as elsewhere, due to it being a key input for infrastructure and construction. A competitive price and sustainable supply of cement are thus very important for growth and development. The cement industry is capital intensive, and requires relatively large-scale production to achieve low production costs. This implies that the industry is concentrated, and that the producers are likely to have market power that they can exploit, including via collusion. Therefore, the nature of competition and its relationship to investment and productivity in the cement industry, as well as the price of cement, are important concerns in a country’s development agenda. This dissertation uses data on the cement industry in Ethiopia, including data from a survey of cement producers, to assess the changing market structure and concentration, and the relationship between competition, productivity, and the cement prices in the country. It finds that the entry of new producers has had a significant in effect in reducing prices and on improving productivity. New producers are more energy efficient; however, some rationalisation is required, with smaller and older producers needing to be closed down and industrial policy assisting in industry restructuring