For decades, Mugher Cement Factory has been a mainstay of Ethiopia’s construction sector. The state-owned enterprise has supplied cement and clinker for private investment, government projects, housing developments and roads across the country.
However, a performance audit by the Office of the Federal Auditor General (OFAG) has identified serious challenges in production, raw-material supply, equipment maintenance, procurement and sales accountability.
The audit, covering the period from the 2015 Ethiopian fiscal year through the second quarter of 2018, found that Mugher’s share of the domestic cement market had fallen to about 9.77 per cent, placing it fourth behind Dangote, Derba and National. OFAG warned that the factory risks losing further ground unless it addresses the problems identified.
The audit found a persistent gap between production targets and actual output. Between the 2015 and 2017 fiscal years, management planned to produce about 2.1 million tonnes of clinker, the intermediate material used to make cement. Actual production reached 1,522,011 tonnes.
A similar shortfall affected raw-material extraction. Of the 4,768,898 tonnes of limestone, clay and sandstone scheduled for quarrying, the factory extracted 3,416,492 tonnes.
The audit said the gap between extraction and factory requirements exposed weaknesses in coordinating raw-material supplies. Inconsistent supplies of limestone and clay can interrupt production and contribute to operational inefficiencies.
Finished-cement production also fell short of targets. Production Line One achieved 75.8 per cent of its target, producing 812,268 tonnes against a planned 1,070,801 tonnes. Line Three achieved 72.5 per cent, producing 1,336,715 tonnes against a target of 1,843,140 tonnes. Line Two experienced prolonged stoppages and did not consistently produce clinker or cement.
The audit also identified shortcomings in procurement and equipment maintenance. Some purchases of spare parts and machinery were made without the required technical evaluations. In other cases, contracts were not finalised with suppliers before purchases were made, exposing the factory to risks involving product quality, delivery schedules and financial accountability.
Procurement plans were also under-implemented. Despite budgets for spare parts, actual purchases fell short, leaving aging machinery without components needed to prevent breakdowns.
The audit found that inadequate preventive maintenance and spare-part shortages had left critical equipment, including kilns, mills, motors and conveyors, idle for extended periods. It noted that upgrading machinery alone would not resolve the factory’s problems without technical supervision, realistic financial planning and access to foreign currency.
The report also raised concerns about production reporting and inventory controls. Figures submitted to the supervising Chemical Industry Corporation often lacked complete supporting documentation. In some cases, the factory reported production and customer deliveries but did not fully account for remaining quantities, internal consumption, warehouse stocks or damaged goods.
The auditors said the gaps did not, by themselves, establish wrongdoing, but warned that weak record-keeping made it difficult to verify inventory, track losses and maintain effective financial controls.
The factory’s sales and distribution practices also came under scrutiny. The audit identified cases in which distributors bypassed competitive tendering procedures, purchased cement directly from the factory or received allocations despite losing formal bids.
A backlog of uncollected revenue from historical credit sales has added to the pressure, limiting the factory’s working capital and its ability to finance raw materials and routine maintenance. The audit called for stronger debt recovery, stricter sales-contract terms and clearer delivery deadlines, supported by penalties for delays in collecting cement.
The findings point to a need for coordinated reforms at Mugher Cement. The factory has significant production capacity, but its performance has been constrained by supply interruptions, equipment breakdowns, procurement weaknesses and problems in sales and inventory management.
Reversing the decline will require more than setting production targets. The audit points to the need for improved supply-chain planning, compliance with procurement rules, equipment maintenance, stronger financial controls and a more transparent distribution system.
