JSE-listed Pretoria Portland Cement’s (PPC’s) African expansion strategy is gaining momentum, with the company and the Industrial Development Corporation (IDC) on Wednesday announcing the joint acquisition of a 47% stake in an Ethiopian cement firm.
PPC, which is aiming to earn as much as half of its revenue from outside South Africa in the next few years, would spend $12-million cash to secure 27% of Habesha Cement Share Company (HCSCo).
The IDC, South Africa’s State-owned development finance institution, would simultaneously invest $9-million for a 20% stake in HCSCo, which is building a 1.4-million-ton cement plant at a cost of $130-million near Addis Ababa.
“We are on record that our strategy is to grow our revenue earned outside South Africa to between 40% and 50% during the next few years and that we have been working on various opportunities on the African continent. This is one of those opportunities,” commented CEO Paul Stuiver.
PPC currently generates about 20% of its revenue outside South Africa, and the Ethiopian investment – its first foray into the East African cement market – is estimated to take that to 25%.
Speaking to Engineering News Online, PPC corporate strategy and communications executive Kevin Odendaal noted that Ethiopia’s gross domestic product growth was forecast at about 8%, which boded well for cement demand.
He said PPC would continue to focus on its strategy of growing its presence in other African countries, “going up the spine of the continent”.
“We are looking at Zambia, the Democratic Republic of Congo, Kenya, Tanzania, as well as Uganda and Rwanda.”
Construction companies are increasingly looking at opportunities in the rest of Africa, as growth slowed in South Africa.
Citing industry statistics, which showed that the first quarter was up just over 6%, Odendaal said that there was still positive momentum in South Africa. “We saw this carried through to the end of June and would have to see how the market does going forward.”
Meanwhile, PPC reported that the HCSCo plant was in the early stages of construction with first cement production planned for the first half of 2014. The plant’s future development plan includes an option to double the capacity to 2.8-million tons a year.
During the initial construction phases, PPC would assist HCSCo by providing operational and technical expertise and with the training of plant personnel at its operations and in the PPC Academy in South Africa.
In addition to the equity investments by local shareholders, PPC and the IDC, HCSCo has secured $86-million debt financing from the Development Bank of Ethiopia.