South Africa’s cement market is set for even fiercer competition with the entrance of the Jidong Development Group, one of the largest enterprises in China’s building materials industry and one of the world’s top five cement groups.
A R1.8 billion greenfields pure cement plant with a capacity of more than 1 million tons a year is to be built at an established limestone deposit near Northam in Limpopo. It will be well placed to serve the major cement demand centres of Johannesburg, Pretoria, Rustenburg and Brits.
The project is being undertaken by the Mamba Cement Company, a special purpose vehicle established to construct and operate the cement production facility and mine the limestone.
Mamba Cement has been provided with R1.1bn in debt capital jointly by Nedbank Capital and the Bank of China Johannesburg.
The majority shareholders in Mamba Cement are Jidong Development Group and the China-Africa Development Fund (CAD Fund), with a 51 percent shareholding in the project.
Jidong and the CAD Fund’s shareholding in Mamba Cement is held through African Rhino Cement, which is 60 percent owned by Jidong and 40 percent by the CAD Fund.
The other shareholders in Mamba Cement are majority black women-owned and managed investment and operating group Women Investment Portfolio Holdings (Wiphold), with a 23.9 percent stake, and the unidentified holder of the limestone mining rights, with a 25.1 percent shareholding.
Gavin Bouwer, the senior vice-president and chief manager at Bank of China Johannesburg, said yesterday that construction of the new plant would start in about three months and be completed in about 18 months.
Bouwer said the total project value was about R1.8bn, with Mamba Cement shareholders providing equity in addition to the R1.1bn loan.
Jidong subsidiary Hebei Building and Material Industry Design and Research Institute will enter into a fixed-price, turnkey, design and construction contract with Mamba Cement to build and hand over a fit-for-purpose plant within a defined period.
The plant will incorporate a waste heat recovery system, which will generate 25 percent of the power required to operate the plant.
Jidong will also enter into a production, management and technical services agreement with Mamba Cement to provide key management and support the operations of the company.
Nedbank Capital head of infrastructure, energy and telecoms Mike Peo said the project finance deal was the first opportunity for Nedbank and Bank of China Johannesburg to work together as joint mandated lead arrangers and, based on the success of the deal, Jidong had approached Nedbank Capital and Bank of China Johannesburg to act as its banking partners in its expansion efforts into the rest of the continent.
Zhikun Qiu, the chief executive at Bank of China Johannesburg, said the deal held particular appeal given the significant economic development potential it held for southern Africa.
“A new entrant will not only help to instil competition into the market but also serve to stimulate economic growth and job creation in line with the country’s established development plans. The Bank of China is pleased to have been a key part of such an economically relevant initiative,” he said.
South Africa’s established cement manufacturing giants have had to face up to increased competition this year when Sephaku Cement became the biggest new entrant to the sector since 1934. It started commercial production at its Delmas milling plant in January.
Market leader PPC has reacted with a strategy to expand into the rest of Africa with the aim of generating 40 percent of its revenue from outside South Africa by 2017.