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

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

PPC is already working directly with a municipality on a project to build 4 500 affordable housing units for mineworkers residing in the area and is in exploratory discussions with the Develop- ment 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 will 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 acknowledges that such collaboration requires a change of thinking at the group, which has 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 says, while stressing that the company is still feeling its way in this regard.

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

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

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

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

The group is “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, will be taken after elections in that country.

The company marked its centenary in Zimbabwe in February, where progress has been made on ensuring compliance with emerging indigenisation legislation. Gordhan confirms that the group will 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, taxes, depreciation and amortisation rose 3% to R1.1-billion, while normalised headline earnings per share increased by 4% to 85c.