New report highlights how imported cement destabilises the economy

13th September 2023 By: Darren Parker - Creamer Media Contributing Editor Online

New report highlights how imported cement destabilises the economy

CAMM founding director and GIBS economics lecturer Dr Adrian Saville, Business Unity South Africa CEO Cas Coovadia, Industry Insight CEO Elsie Snyman, PPC South Africa and Botswana MD Njombo Lekula, CAMM research associate Francois Fouche, and Cement and Concrete South Africa CEO Bryan Perrie
Photo by: Creamer Media

The negative impact on the South African economy caused by substituting local cement production with imported cement was highlighted in a report released by cement manufacturer PPC in conjunction with the Centre for African Management and Markets (CAMM) at the Gordon Institute of Business Science (GIBS), in Johannesburg, on September 13.

The report, titled ‘The socioeconomic impact of substituting local cement production with cement imports’ was based on a report commissioned by PPC and independently conducted by CAMM.

The report provides an overview of PPC's contribution to the South African economy and forecasts the potential social and economic impacts of a significant displacement of local cement production in favour of imported cement.

“The report tangibly demonstrates the serious and complex threats that cement imports pose to our industry, society, and country's development,” PPC South Africa and Botswana MD Njombo Lekula said, noting that the report was aimed at consolidating these dimensions into the impact analysis.

Based on the scenario modelled in the report, some of the more sobering estimations on the impact across the entire PPC value chain include more than 2 200 jobs potentially being at risk, primarily across marginalised communities.

In addition, the report shows a potential R2.6-billion-a-year loss in economic value in an already-strained economic environment.

The report shows that PPC was a major economic contributor in South Africa, with the business’ operations adding about R8.8-billion to the national gross domestic product (GDP) last year through its value chain – equivalent to 0.13% of the country’s total GDP.

Despite the subdued economic climate and infrastructure backlog South Africa experiences, PPC’s purchased goods, services and capital equipment from local suppliers were valued at more than R4.7-billion.

PPC’s Western Cape-wide employment is estimated at 2 667 jobs. Based on information from the government’s public works programmes, it is estimated that yearly public sector spending of R410-million would be required to achieve the same employment contribution.

In this vein, while the findings of the report demonstrate the significant economic and social contribution made by PPC to South Africa, the report also shows the material impacts and implications that follow from the displacement of domestic production by imported product.   

The report was launched as part of a panel discussion that unpacked the urgency of enabling policies for building a conducive, local production environment.

Hosted by CAMM founding director and GIBS economics lecturer Dr Adrian Saville, the panel of trade and industry experts included Lekula, CAMM research associate Francois Fouche, Cement and Concrete South Africa CEO Bryan Perrie, Business Unity South Africa CEO Cas Coovadia and Industry Insight CEO Elsie Snyman

The discussions highlighted the imperative to establish robust policies which are critical in levelling the playing field for local producers. Despite the intensifying challenges faced, numerous measures taken by the construction industry were noted as ways to ensure innovative, sustainable development that is responsive to evolving market dynamics.

“The report provides valuable insights into the socioeconomic contribution of the cement industry and the impact that would be experienced through displacement by cement imports in South Africa – disproportionately impacting economically vulnerable towns and having substantial impacts across provinces that are home to PPC’s plants.

“This report bears out the interconnectedness of industries, individuals, communities and the State. None of these can truly succeed in the long term unless each of the others functions properly. An economy is more like a living organism than a dispersed archipelago,” Saville said. 

He highlighted some of the key findings in the report.

“The quantitative portion of the report applied an established modelling tool to capture the totality of the economic value that the activities of a single firm or industry contribute to society. On-the-ground interviews with a variety of stakeholders provided rich context within which we should interpret the numerical analysis,” Saville explained.

The panellists noted that the local cement industry faced numerous compliance costs that did not affect foreign suppliers, such as carbon taxes and adhering to the Mining Charter.

Lekula said the local cement industry had repeatedly shown its commitment to innovation and ongoing improvement through its decarbonisation efforts.

In the face of significant economic challenges, including low infrastructure spending, poor transport infrastructure and increased energy costs, he said the sector had worked hard to remain competitive.

However, Lekula noted that it needed an enabling policy environment to keep effectively serving South Africa’s economic, social and developmental needs.

Fouche, who is an author of the report, said that protecting the local cement industry was not just a question of employment.

For instance, he noted that, if production were to shut down in the Western Cape, employment would be decimated, but so would the complexity of local economic activity.

He pointed out that importing materials was considerably less complex than producing, which involved advanced technology, processes and complex activities.

“We risk losing those skills in the economy, which we cannot afford,” he said.

Fouche explained that research made it clear that more economic complexity, and more diverse skills, were associated with better economic performance.

“South Africa is currently highly proficient at producing cement and we manage the complex value chain well. Why compromise that by permitting dumped imports?” he said.