China's Jidong Development Group, one of the world's top five cement makers, is to enter the South African market with the construction of a R1.8-billion, one-million tonne per annum cement plant in Limpopo province.
Nedbank Capital and the Bank of China Johannesburg on Monday announced that R1.1-billion in debt capital had been raised to fund Mamba Cement, a special purpose company established to build and operate the plant at an established limestone deposit near Northam in Limpopo.
Equity in addition to the loan will be provided by Jidong Development Group, the majority shareholder in Mamba Cement, the China-Africa Development Fund, and South African investment and operating group Women Investment Portfolio Holdings (Wiphold).
Mamba Cement will manufacture "high-quality pure cement with the capacity to produce very cost-effective products," Nedbank Capital said in a statement, adding that the company would have "a sustainable transport advantage due to its proximity to the major cement demand centres of Johannesburg, Pretoria, Mpumalanga, Rustenburg and Brits".
The investment is expected to create jobs and provide opportunities for small suppliers for communities north of Brits. "In addition, the sponsors and developers have also committed to supporting local schools and other socio-economic development initiatives in the long term," Nedbank Capital said. "The project will also result in a major improvement of basic infrastructure such as power and roads, which will benefit adjacent communities."
The South African cement market received an additional 2.5-million tonnes of annual capacity this year with the completion of Sephaku Cement's new plant in North West province.
The Nigerian-backed company is the first new entrant in the South African cement production market to open its own new plant since 1934, challenging established local producers PPC, AfriSam, NPC and French multinational Lafarge.
Market researchers Frost and Sullivan have predicted that rapid infrastructure development in South Africa and its neighbouring countries will boost the prospects of the cement industry in the southern African region.
Frost and Sullivan's study, "Southern African Cement Industry Production and Investment Forecasts", published in September, forecast that US$940-million would be invested in the cement industries of three countries - South Africa, Zambia and Zimbabwe - between 2013 and 2018.
Cement production will be instrumental to government expenditure plans, the study found, especially the Regional Infrastructure Development Master Plan which the Southern African Development Community (SADC) aims to roll out over the next 15 years.
Internally, the South African government is planning to spend in excess of R4-trillion on a massive state-led infrastructure drive over the coming years, with a substantial focus on rail, road, energy and water infrastructure.
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