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Sep 09, 2005

On-The-Air (09/09/2005)

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Construction|Engineering|Africa|Building|CoAL|Eskom|Exploration|Housing|Industrial|Mining|Resources|Safety|Africa|Energy|Infrastructure
Construction|Engineering|Africa|Building|CoAL|Eskom|Exploration|Housing|Industrial|Mining|Resources|Safety|Africa|Energy|Infrastructure
construction|engineering|africa-company|building|coal|eskom|exploration|housing|industrial|mining|resources|safety|africa|energy|infrastructure
© Reuse this Every Friday morning, SAfm's AMLive's radio anchor John Perlman speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday's At the Coalface transcript:

Perlman: A big cement investment in Limpopo province. What's that all about?

Creamer: Cement consumption has been soaring in South Africa. If you look at Gauteng levels alone, they're approaching European Union levels of consumption. There is a fear that in 2007 there may be a shortage of cement in South Africa. The big driver has been housing, new housing and modifications to houses, but now there's a lot more on the horizon. Eskom are looking to spend R95-billion in the next five years in the energy infrastructure. There is going to be more transport infrastructure and all these factors coming together prompted the biggest cement producer, that is Pretoria Portland Cement (PPC) to invest R1,36-billion in a new cement plant which will produce an additional million tons of cement a year. They're also looking to be flexible, of course. If that market doesn't show up, they can retire off old-plant. As things stand at the moment, all the forecasts of consumption have been exceeded.

Perlman: Now Martin, there's been a lot of speculation about the boom, particularly looking at the JSE, are we going to see a downturn anytime soon? I believe two top business leaders have got some optimistic views on the subject.

Creamer: Two top business leaders have pulled out graphs, which have been very fascinating. The first has been Chip Goodyear of BHP Billiton, who pulled out a 200-year graph showing the commodity cycle in the United States and pointing to a possible multi-decade growth in commodities market. His graph is fascinating because it takes into account the big pull of the industrial revolution, when electricity was introduced, post-WW II and now he's saying there could be a new secular or long-term growth cycle emerging. Not to say that cycles won't go up and down in the short-term, but the trend he expects in all probablility is upwards for decades. The other business leader, a local one, is Murray & Roberts' Brian Bruce. He pulled out a nice 60-year graph tracking gross fixed capital formation (GFCF) and here we also see that our construction economy, after three decades of decline, is on the cusp of possibly a multi-decade up-turn. That comes against the background of the government now saying our target for GFCF is 25% of GDP. We are only sitting at 17% of GDP at the moment and also that our normal economic growth should be at 6% or 7%. So, those two optimistic scenarios aren't going to have people running out and betting their companies, but I think it does point to the need for building this longer-term, multi-decade scenario into your planning, particularly with regard to human resources in South Africa, so that people look long and train people.

Perlman: Of course, one of the big drivers of growth of any kind is China, and I believe one of our giants, Anglo American, is doing some business there. Tell us about it.

Creamer: The Shaanxi province is the coal province of China and their delegates were in town last week for an investment symposium in Johannesburg. The hot topic was the issue of this investment by South African mining company AngloCoal in particular, part of Anglo American, investing in China.

AngloCoal has been exploring in Shaanxi, the coal province of China for some time now with considerable success and that success has led to an investment. They had an IPO recently in the biggest energy coal company there in which Anglo American made an investment. The strategy there is to keep looking for coal, but at the same time already the indications are that there could be a long-term coalmine between AngloCoal and the local Chinese investors. They're talking about a 50-year coalmine plus additional exploration going ahead. China is a big supplier of coal but it has been undercapitalised. We're talking about an area which is 500 km west of Beijing and it's in this west that it's rather depressed, and people are looking for entries to investment there and this is the sort of capital formation they're looking for. It will also lead to more safety in their coalmines, because of course, we're constantly reading about hundreds of people dying in Chinese coal mines, so this will be a big challenge for any investor to make sure that in the mines they have, the people don't die at the rate that they've been dying.

Perlman: Martin Creamer joins us again at the same time next Friday for another look at what's happening at the Coal Face. Martin is publishing editor of Engineering News and Mining Weekly.

Edited by: Yolande Botes
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