South African cement producer PPC reports that it is exploring ways to add momentum to the execution of South Africa’s multibillion-rand infrastructure programme, on which the immediate outlook for domestic cement demand rests.

During the interim period to March 31, 2013, PPC recorded a 6% increase in cement sales, underpinned by an improvement in South African demand and strong growth out of Zimbabwe.

However, domestic demand remained about 1.5-million to 2-million tons below the peak levels of around 14-million tons recorded in 2007/8.

CEO Ketso Gordhan indicated that, while the recovery in South African cement demand was expected to continue in the near term, PPC was also exploring ways of adding further impetus, possibly through partnerships with government on specific projects.

It had employed Yogesh Narsing, previously employed by Minister Trevor Manuel’s National Planning Commission Secretariat, to explore the opportunities for greater collaboration, particularly on cement-intensive social and economic infrastructure projects, such as affordable housing, school building and dam construction.

Gordhan told Engineering News Online in an interview that the initial focus would be participation in forums aimed at rebuilding trust between government and the private sector. But, in parallel, the company was also exploring ways to “play a complementary role and add momentum” to the execution of the infrastructure projects.

PPC was already working directly with a municipality on a project to build 4 500 affordable housing units for mineworkers residing in the area and was in exploratory discussions with the Development Bank of Southern Africa on the packaging of a project to build 200 new schools so as to make it appealing to the private sector.

All these discussions would be sensitive to South Africa’s competition legislation, as well as to the Public Finance Management Act’s stipulation that public procurement be pursued through competitive bidding processes.

Gordhan acknowledged that such collaboration required a change of thinking at the group, which had hitherto focused simply on the supply of material for projects.

“What we are exploring at the moment is becoming part of the infrastructure project promotion team,” he said, while stressing that the company was still feeling its way in this regard.

DRC PROJECT ADDED TO AFRICA MIX

The group strategy was far better defined with regard to plans for expanding the business in the rest of Africa, where cement demand was expanding along with far higher levels of economic growth.

PPC was aiming to earn 40% of its revenues from the rest of the continent by 2016/17 and was moving ahead with projects in Ethiopia, Rwanda and Zimbabwe.

However, Gordhan confirmed that he was also optimistic that the group would proceed with another one-million-ton-a-year project near Kinshasa, in the Democratic Republic of Congo, which would involve an investment of about $200-million.

Progress had also been made in dealing with the financing constraints that had delayed the construction of the Habesha cement plant, in Ethiopia, where construction should now commence in October.

The group was “ahead of the curve” in Rwanda, following the acquisition of that country’s only cement producer, Cimerwa; while an investment decision on another one-million-ton facility about 120 km north-east of Harare, in Zimbabwe, would be taken after elections in that country.

The company marked its centenary in Zimbabwe in February, where progress had been made on ensuring compliance with emerging indigenisation legislation. Gordhan confirmed that the group would retain 70% ownership, having received credit for its domestic listing and an employee share-ownership scheme.

During the interim period, the JSE-listed group reported an 8% rise in revenue to R3.8-billion, from R3.5-billion in the corresponding period of 2012, despite a 16% drop in lime revenue, as a result of a 20% decline in sales volumes.

Earnings before interest, tax, depreciation and amortisation rose 3% to R1.1-billion, while normalised headline earnings a share increased by 4% to 85c.