JSE-listed cement producer PPC has added Algeria to its $1-billion African project port-folio, with investments also advancing in Rwanda, Ethiopia, the Democratic Republic of Congo (DRC) and Zimbabwe. The commissioning of the 600 000 t/y plant in Rwanda should begin later this year.
PPC CEO Ketso Gordhan tells Engineering News the feasibility study of the Algerian prospect is well advanced and that the company hopes to make an investment decision before the end of 2014.
The project is being planned for development near the north-eastern Algerian town of Sétif and, should it proceed, will be constructed by Chinese engineering, procurement and construction group Sinoma. Sinoma is also building the other four projects, where PPC has engaged Holtec and/or Ercom, both of India, as project managers.
Algerian cement demand is estimated at 22-million tons a year and PPC has entered the market through the acquisition of a 49% interest in the Hodna Cement Company, which has been investigating the development of a two-million-ton-a-year facility.
“We are pretty optimistic that we will be on site by the end of the calendar year,” Gordhan reports.
The plant will be funded through a combination of debt and equity and, as with the other African projects, will be pursued with indigenous partners.
PPC aims to retain a majority stake in all the projects and has managed to achieve that goal in all instances barring the Ethiopian plant, where the company is hoping to gain majority control over time.
Development finance institutions PTA Bank and the International Finance Corporation (IFC) are backing some of the projects, where debt typically comprises about 65% of the overall capital costs. The IFC is also taking up an equity position in the DRC project.
The push into Africa comes amid flat demand conditions in PPC’s home market of South Africa, where cement sales for the six months to March 31 were negatively affected by the platinum strike and by heavy rains during the period.
Gordhan reports that sales in the North West province, where many of South Africa’s platinum mines are located, fell by as much as 25% during the period and were not forecast to recover strongly in the near term.
The group’s total cement sales volumes improved by 2% for the period, however, while revenue increased by 9% to R4.2-billion.
Headline earnings per share rose 50% to 96c, but operating margins contracted.
“We feel very vindicated in choosing the African expansion strategy based on what is happening in the South African market,” Gordhan says.
However, he believes domestic conditions should improve in the second half and expects that South African sales for the year could be similar to those achieved in 2013.
Executive Pay
Meanwhile Gordhan, who last year took a R1-million pay cut and froze increases for the cement producer’s 60 top managers in a bid to close the cavity between its highest and lowest paid employees, believes a communication breakdown between managers and workers is as much to blame for the prevailing fallout over executive pay as was the actual salary differential.
The issue of executive pay had come to the fore during the protracted platinum-sector strike, where workers have been holding out for a minimum wage of R12 500 and have also attacked as exorbitant the salaries of certain platinum company executives.
Gordhan said the communication gap between South African executives and workers is possibly as “big as the gap in income”.
“We, [as executives], need to understand the workers. We have to have frank and honest conver- sations about what is fixable, what’s not fixable. I think unrealisticdemands can partially arise from people just not understanding,” he said.
New relationships, based on information shar- ing and greater levels of trust, would need to be forged across the South African business land-scape.
However, the actual size of the wage gap was also important, with PPC having reduced the gap between Gordhan and its lowest paid worker from 120 to one to 40 to one.
The wages of the company’s 1 200 lowest paid workers had also been increased. “It hasn’t cost us a fortune to do this and it is achievable.”
Greater coordination across business on the executive-pay issue was also required, with Gordhan arguing that Business Leadership South Africa was probably best placed to act as the “common voice of business” on the matter.
“The absence of a single voice is one of the problems we have got to overcome. “We are currently fragmented [as business], but we need to come together and do something as a team.”