AFRICA: NIGERIA: Sephaku to build plant in Limpopo

NIGERIAN-backed Sephaku Cement says it will build a 3000-ton per day integrated cement production facility near Dwaalboom in Limpopo , the second big investment that the new entry onto the South African cement scene has made since October .

This comes as Southern Africa’s largest cement producer, Pretoria Portland Cement (PPC), yesterday said headline earnings per share for the six months to March would be down between 35% and 40% from the same period last year due to poor business conditions.

It said the pain came from lower sales volumes, falling prices and higher input costs across all its operations. PPC also said it was in a closed period, and could not comment further. The fall is more than the 30% advised in PPC’s trading statement last month.

Despite demand for South African cement falling each year for the past four years, South African-based companies, including Sephaku, are investing large sums at least 30 years into the future.

We firmly believe that demand will pick up again in South African infrastructure development, and there will be a pick-up in residential demand," Sephaku CEO Pieter Fourie said yesterday.

"We believe it is a short-term crisis in the cement and building industry, and that if you look at a 30-year horizon, SA is one of the better places to be."

PPC is increasing capacity by 50% at its Western Cape production facilities at a cost of R3bn over six years, and Sephaku’s parent company, Lagos-based Dangote Group, has invested R1,2bn so far into developing two South African plants .

The inland region constitutes about 65% of South African cement demand, and Sephaku’s production of about 4-million tons a year was expected to be up and running by 2015, adding to a projected 16- million ton a year market.

But more than just being a place to produce cement, SA is seen as a springboard into other parts of Africa, with Dangote investing about $3,9bn into production facilities in Tanzania, Zambia, the Democratic Republic of Congo, Cameroon and Senegal.

Sephaku wants to get a jump on building African cement plants in order to position itself for African infrastructure development.

Mr Fourie said global cement companies had taken a beating in developed markets, and their balance sheets were still not strong enough to commit to major expansion plans over the next five years. Sephaku identified a gap in the South African market for building new cement plants, as the average age of plants in the country is about 30 .

He said he thought the long-term sustainable growth rate for South African cement demand would be in the region of between 4% and 5% a year.

PPC is upgrading the kilns at its De Hoek and Riebeeck plants near Cape Town, which are about 40 years old and though they still produce good quality cement, they are not energy-efficient.