NAMIBIA: Chinese company launches JV with Namibia cement company

The Chinese company, Asian and African Business Management, has teamedup with a Namibian company, Whale Rock Cement, to set up a $350 million cement plant.

A memorandum of understanding was signed in Windhoek Thursday between the twocompanies to kick start the project that will see the creation of 400 jobs.

The Chinese Ambassador to Namibia Xin Shunkang and the chairperson of the Asian andAfrican Business Management Zhang Jimin attended the signing ceremony.

A few years ago, Whale Rock Cement (Pty) Ltd came onto the Namibian market with itscement brand Cheetah Cement.

This has triggered a fierce competition with the existing cement suppliers leading to a pricewar that drove Whale Rock off the market.

Asian and African Business Management has more than 30 years experience in cementproduction and employs 6,000 workers.

The plant, about 245 kilometers from the capital Windhoek will be the second cement plant inNamibia after Ohorongo which produces more than 500,000 tons per year.

Whale Rock Cement public relations officer Manfred Uxamb said a comprehensive feasibilitystudy has been done and that a limestone survey has also been carried out.

"Together with our partners, we have performed comprehensive investigation of the land plot,limestone, clay, wasted iron ore, gypsum which is necessary for this cement plant," Uxambsaid, adding that they found that all these resources meet requirements.

"The survey also included a market research that proved that the project is feasible. Thefeasibility study was presented to the Government of the Republic of Namibia and approved,"Uxamb said.

According to Uxamb, the area chosen for setting up the plant has proved that there is enoughlimestone deposits to last more than 40 years and pump more than $30 billion into the economy.

NAMIBIA: Durban for Bigger Stake in Ohorongo Cement

The Development Bank of Namibia is set to increase its stake in Ohorongo Cement this month, according to officials working on the new shareholding structure.

Foreign minority shareholders Development Bank of Southern Africa (which owns a 7,3% stake and IDC of South Africa (which owns 20%) are in the process of selling their shares to Namibian institutional investors such as pension funds.

According to sources who preferred to stay anonymous since the official announcement will only be made later this month, Schwenk Zement KG of Germany is the majority shareholder with about 60% stake.

DBN spokesperson, Jerome Mutumba declined to comment when asked if the bank was in the process of increasing its stake of 10% in Ohorongo.

The official announcement is expected to be made on 29 July during the ground-breaking of the composite cement production plant and the inauguration of a training centre at Otavi where the company operations are based.

In its invitation to the event, Ohorongo said a Namibian shareholding structure will be announced.

NAMIBIA: Ohorongo credits growth to infrastructure and exports

Namibia’s sole cement manufacturer, Ohorongo Cement, says 2015 has thus far seen tremendous results compared to the same time in all preceding years since the company started production in 2011.

Managing Director Hans-Wilhelm Schutte attributed the much improved performance to an increase in infrastructure projects by both the government and the private sector, as well as export inroads made in neighbouring countries.

During a visit by an Otjozondjupa regional delegation, led by Governor Otto Ipinge, on Thursday last week, Schutte admitted that initial sales were “extremely tough” but was quick to add that the factory, which constituted an initial investment of N$2.5 billion, has been running perfectly since day one and expects both local and regional sales to grow, going forward.

“Since 2011 we have improved significantly. Towards the second half of 2013 things really started picking up and 2014 saw us doing really well in terms of sales,” said Schutte.

He noted that massive cement-consuming infrastructure projects such as NamPort’s port expansion and the Neckartal dam have made notable contributions to Ohorongo’s performance of late.

Notable inroads have been made in countries such as Botswana, Zimbabwe, Democratic Republic of Congo and Zambia.

He, however, expressed disappointment at border control frustrations in exporting cement to Angola. “We have not made any inroads in Angola. The border control on the Angolan side is one of the biggest challenges. Sometimes the trucks have to wait at the border for four to six days and this is just unacceptable,” complained Schutte.

Also, regarding the outcome of the ongoing court case, for which judgement is being awaited, where infant industry protection (IIP) is being challenged by a cement importer, Schutte remarked that it is Ohorongo’s intention to remain competitive in the medium to long-term, both domestically and in the region. “I think it’s great that African countries are protecting their own markets,” said Schutte.

Government has granted IIP to the cement, chicken processing and dairy industries saying they add value to Namibian products and create jobs in the economy.

However, local consumers have argued that prices of these ‘protected’ products are not necessarily lower than those of imported products despite the protection measures. But government has strongly defended the IIP scheme, saying the protection measures promote local value addition, which grow the economy.

Meanwhile, Mwadina Muashekele-Sibiya, the special advisor to Otjozondjupa Governor Ipinge, said the governor’s office was very impressed with Ohorongo Cement, particularly with the company’s support to the local community in terms of both local procurement and corporate social responsibility.

“They are a company that supports sourcing everything from the local market, which is a strategy that can only uplift the region and the country at large. I advise all businesses operating in Namibia to take this approach,” said Muashekele-Sibiya.

She added that she was amazed at the cleanliness of the Ohorongo plant, especially considering that it is a cement factory.

The Germany-based Swenk Group, through Swenk Namibia (Pty) Ltd is the majority owner of Ohorongo Cement, with minority shares held by the Industrial Development Corporation, the Development Bank of Namibia and the Development Bank of South Africa.

NAMIBIA: Biofuel boost for Namibia's cement-maker

You can hear it long before you can see anything. Slowly and relentlessly, the specially developed harvester cuts its way through the tangled undergrowth. Blackthorn can grow to as high as seven meters (23 feet) and form impenetrable thickets. It won't let any other species grow in the vicinity, much to the chagrin of local famers. But the harvester rips through it, turning the bush into wood chips.

They are used for fuel by Ohorongo Cement, Namibia's only cement manufacturer, giving it a potential edge over some of its competitors on the world market. Biofuel accounts for 30 percent of Ohorongo's energy needs; eventually the company wants to raise this figure to 80 percent.

"We have the technology and the raw materials to produce high quality cement. We manufacture it economically with staff we have trained ourselves who are really very good workers," he said."In the long term, we will be very competitive," said manager Gerhard Hirth. Not having to rely on coal and oil imports, the company was able to keep energy costs down while making a positive contribution to the environment.

Hirth, a German national, comes from Ulm. The family firm Schwenk Zement KG has been in the cement business for the last 160 years. "Nonetheless," he said, "Africa was new - and different."

A small player compared to South Africa

Hirth has invested 250 million euros ($340 million) in Namibia. As well as deploying modern technology, he also chose a logistically favorable location from which his high quality building material can be freighted to Botswana, Zimbabwe and Zambia.

Ohorongo's aluminum outbuildings glisten in the midday sun. The landscape appears deserted, apart from a truck stirring up a trail of yellow dust on the horizon. Local residents, on discovering that a major investor is planning a huge project nearby, are often skeptical. But the people of Otavi appear contented. Jona Israel is filling up his Landrover at a gas station. "By and large, it is a development we are happy with," said the haulage contractor. "The factory is a big investment, not just for our region but for the whole of Namibia." His trucks are now delivering cement so he has profited personally from the arrival of the plant. Hilma Shaanika believes the benefit to the local community has been minimal. "The jobs went mostly to people from the big cities, from Windhoek and Swakopmund. But people in Otavi are poor," she said.While Hirth is in his office pouring over his balance sheets, 50 kilogram (110 lb) sacks of cement are coming off the conveyor belt in rapid succession. The plant produces 600,000 tons annually, of which 500,000 is destined for the Namibian market. The rest is exported. Namibia is only a small cement producer, neighboring South Africa is a much bigger player turning out 16.5 million tons a year.

Production manager Manfred Pirker concedes that many of the staff come from the cities, but says well trained skilled workers were difficult to find in northern Namibia. The company will have to train more workers itself in future.

A few houses further down, Matsika Farai David is sitting behind an array of household goods he is selling - plastic combs, pots and batteries. "Of course Ohorongo has improved our lives," said the street vendor. "Many who used to hang around out on the streets now have a job to go to." In addition the company has done work on the road and donated an ambulance to the local hospital.

No escape from Chinese competition

Ohorongo Cement employs 330 people but it has also generated employment indirectly as well. Job opportunities have been created for subcontractors, which wouldn't exist if the plant wasn't there. They include supplying catering, work clothes, and freight haulage. Ohorongo's management says the company keeps a total of 2,500 people in work. In Namibia, where 30 percent of the labor force is unemployed, every one of those jobs matters.

Ohorongo's company history is a good guide to the obstacles littering the road to entrepreneurship in Africa. Markets can be fickle. Ohorongo had counted on being able to sell cement to oil-rich Angola. "That was a mistake," said Gerhard Hirth. Angola slapped an import ban on Namibian cement. Angola's cement now comes from China.

Hirth said the Chinese are always a few cents cheaper than their competitors. The Namibian government had promised Ohorongo Cement it would be protected while in its initial growth phase by a tariff agreement. Cement imports from outside Namibia would be subjected to a 60 percent levy. But now there is a Chinese importer operating in the country, paying no levy and offering cement at competitive prices. He had taken legal action against the tariff agreement. "The cement is already in Namibia and we have lost more than 30 million euros," Hirth said. Legal proceedings are still in progress and are unlikely to end anytime soon.

AFRICA: NAMIBIA: Ohorongo-Afrisam Merger Crumbles

The Namibia Competition Commission (NCC) has shot down a proposed merger between cement giant AfriSam and local producer Ohorongo, saying it is potentially anti-competitive and could distort the market at the expense of the consumer.

AfriSam Namibia and Ohorongo Cement in September filed an application that would have allowed AfriSam to sell and distribute cement produced by Ohorongo locally and in neighbouring countries.

Ohorongo plans to produce 700 000 tonnes of cement this year, of which the Namibian market only needs 320 000 tonnes. AfriSam, as the biggest cement company in Africa, has an extensive distribution network and would have been crucial in Ohorongo's export plans.

Announcing its ruling yesterday, the NCC said the proposed merger would have "a significant snowball effect of preventing or lessening competition or restrict trade or the provision of any service or endanger the continuity or supplies or services".

AfriSam and Ohorongo could lodge an appeal against the decision with Trade and Industry Minister Hage Geingob. However, NCC Chairman Lucius Murorua said that the ruling was a good decision.

"It will stand the test of time," Murorua said.

He added that the NCC doesn't take decisions "on the spur of the moment" and that plenty of expertise went into its investigations.

Neither party was available for comment yesterday. Ohorongo's board of directors were meeting on site near Otavi, while Johan Burger, AfriSam's country manager in Namibia, was at his head office in South Africa.

The local cement market currently is monopolistic with only a few suppliers, the NCC said. The market share of AfriSam Namibia is "disproportionately larger" than the other players, it continued.

"Given the larger market share of AfriSam Namibia Cement, the investigation concluded that the firm is currently a significant competitor in the market and exercise considerable dominance. The proposed merger will give rise to an increased market power which will put the merger parties in a strong market position to an extent that it would be able to determine inventory supply and pricing of cement independently from its competitors and potentially distort the monopolistic competitive situation evolving in the cement market."

With the NCC's ruling AfriSam Namibia effectively becomes Ohorongo's competitor. Any unfair pricing practices will be deal with in terms of the law, the NCC warned yesterday.

AfriSam waged a price war with Cheetah Cement in 2007, forcing the smaller local company to eventually sell below its cost price.

The NCC said it was aware of Ohorongo's "enormous potential" in terms of economic growth, job creation and foreign investment.

"Commission encourages that Ohorongo Cement continues its planned production capacity independently for Namibia to have local capacity production of its own cement," it said.

AFRICA: Namibia: Cement Battle Takes New Twist

Windhoek — The battle to control the cement industry in Namibia has taken a new twist, with the new kid on the block, Ohorongo Cement, saying they are the ones intending to take over AfriSam Namibia and not the other way round.

The two companies are currently discussing an agreement for a single cement entity instead of competing against each other for the local market.

However, the two cement companies appear to have different outlooks - with each vying for the control of the market.

"It is us taking over AfriSam operations, after which AfriSam Namibia would no longer exist," says Ohorongo Cement.

AfriSam had earlier explained the deal as an agreement "under which AfriSam organisation will sell and distribute [Ohorongo] cement under the management and brand of Ohorongo Cement in Namibia and neighbouring countries".

It is not yet clear whether Ohorongo Cement would seek infant industry protection from the Ministry of Trade and Industry, despite early indications by senior executives that the company could do so. The trade ministry earlier indicated its willingness to grant infant industry protection to any Namibian companies involved in the production of cement in the country.

According to AfriSam's earlier statement, the agreement would also bind Namibian cement market to AfriSam - meaning that, if need be and for whatever reasons, Ohorongo Cement can only import from AfriSam in South Africa.

"Under the agreement Ohorongo will, until production at its local factory commences, import cement from South Africa," says the joint statement on the matter.

Ohorongo Cement spokesperson, Kirsten Gunzel, says Ohorongo intends to take over 100 percent of AfriSam Namibia's operations, including the distribution, sales and marketing of cement in Namibia.

"If the agreement goes through, the entity AfriSam Namibia will be completely absorbed by Ohorongo. AfriSam Namibia will not be operational anymore," says Gunzel.

Ohorongo says the reason to work with AfriSam Namibia is to use the existing distribution network, which would grant Ohorongo Cement immediate access to the market.

"There is no question that Ohorongo would have taken the Namibian and regional market by storm but, it would have taken longer than it will with the AfriSam agreement," says Gunzel.

Ohorongo Cement is about to bring to production the N$2.5 billion cement plant at Otavi. The plant will have capacity to produce 4 400 bags of cement per hour.

AfriSam is a conglomerate of various companies, including the world's second largest cement producing company Holcim. This makes AfriSam Africa's biggest cement producer with an annual cement production capacity of 4.6 million tonnes, which is produced from six production facilities and distributed through nine strategically located cement depots in sub-Saharan Africa.

Swiss-based Holcim, which has since reduced its controlling stake in AfriSam, countered muffling competition from a Namibian company through a price war. Holcim entered into a price war with Cheetah Cement, a Namibian start-up company with Brazilian partners that wanted to go into cement production in early 2007. The war resulted in Holcim lowering the prices to as low as N$27 per bag of cement, at which stage Cheetah Cement was selling its product below cost.