Lafarge, PPC tough it out in ZimbabweComment on this story
Tawamda Karombo Harare
DESPITE having vast potential for growth, Zimbabwe’s cement industry has been hit by declining demand owing to tough economic conditions in the country, although Lafarge Cement Zimbabwe is revamping its operations while PPC’s local unit is expanding its capacity.
Lafarge invested about $10.7 million (R115.3m) in capital expenditure, which was mainly used to develop the French firm’s mines, during the year to December last year. The company made a net operating income of $9m, with “overall local cement demand” marginally rising 5.6 percent to 1.04 million tons.
This was on the back of the “upgrading of resort facilities” ahead of the UN World Tourism Organisation general assembly, which Zimbabwe co-hosted with Zambia last year, as well as limited government funding for infrastructure projects.
“Aggregate demand for cement was lower than anticipated, as the sector was mainly dependent on individual home building and small-scale projects,” Francis Matanhire, the company secretary for Lafarge Zimbabwe, said last week.
The company recorded gross turnover for the period of $67.6m, a 3.3 percent decline on the previous corresponding period. This was attributed to a “reduction in local and export sales volumes”.
Brokerage and advisory firm Imara Africa Securities said in an e-mailed research note on the company that the performance of the cement industry in Zimbabwe – where PPC and Sino Cement make up the competition for Lafarge – was related to the fortunes of the construction industry.
The report further said, however, that “manufacturers of pipes and roofing sheets also play a role in affecting the direction for demand”.
“Demand is presently being driven largely by retail buyers, but we envisage improved activity on bigger construction projects going forward, as we are cautiously optimistic on the fortunes of the economy,” Tonderai Maneswa, the Zimbabwe analyst for Imara, said.
“We believe that large-scale ventures in the mining and other sectors will take longer to implement given the fluid economic environment.”
Lafarge is also set to pay $1m to a community share ownership scheme, as part of its efforts to comply with Zimbabwe’s contentious indigenisation laws. The policy, which experts say is driving away much-needed foreign direct investment, requires that foreign-owned firms give away majority shares to black Zimbabweans.
PPC’s local unit is undertaking a feasibility study at the Rushinga limestone deposit aimed at determining the appropriateness and profitability of building a $250m factory. Information at hand shows that the new plant will have capacity of 1 million tons a year.