South African cement industry at rock bottom
Durban - The cement and construction industry has almost halved in capacity since last year and stakeholders believe a boon in projects similar to those leading up to the 2010 Fifa World Cup was necessary to resurge the sector.
Level 5 of the government’s tiered approach to combat the coronavirus enforced regulations that brought the industry to a standstill. Sites closed, projects stalled, factories and production plants sat dormant. But level 4 regulations allowed the manufacturing of materials such as cement. However, construction was still prohibited, leaving supplies unsold.
Local hardware stores suffered stock shortage once allowed to operate in level 3. This was because suppliers not being able to function and produce stock during levels 5 and 4.
During level 3, the price of a pocket of cement went from R80 to between R120 and R150. Restrictions were placed on the number of pockets that could be bought. This was allegedly due to a shortage of materials required to produce cement.
Selvan Moodley, the managing director of a Chatsworth construction company, said during levels 5 and 4 he had no income.
“It was like the business involuntarily closed down for good and I had no choice or say in the matter. I had to put projects on hold and abandon sites. My staff used public transport, and given regulations they could not get to sites,” Moodley said.
He knew businesses would reopen at some point but never predicted the lockdown continuing under such strict regulations for almost two months.
“We were all suffering and I felt responsible to pay my staff a moderate daily stipend for them to survive. Through my accountant we applied for Unemployment Insurance Fund relief which only came at the tail end of level four,” he said.
Moodley said he was fortunate no staff was let go.
“Now that we are in level three we are on a good track to normalcy, staff are working and getting paid as we resume projects. All Covid-19 precautions and protocols are followed to ensure everyone’s safety,” he said.
But Moodley said should government impose stringent regulations to combat the infection peak similar to levels 5 and 4 he would not survive.
The construction and cement industry is hopeful that a move to level 2 of lockdown was imminent and more work would emerge. Picture: Waldo Swieger.
Bheki Mthembu is the head of the inland business unit for the continent’s largest cement producer, PPC.
He said unfortunately there was a lack of large-scale construction projects and that left the industry heavily dependent on residential construction.
“There is a very small piece of cake that everyone is fighting for, the demand is less than the supply. Most of our cement goes to retailers and then local builders, but we still cater to larger companies when bulk deals are required,” he said.
Mthembu said Covid-19 served government a wake-up call.
“The sector has had issues for a while and government needs to support us through infrastructure maintenance and other projects. We were in survival mode and Covid-19 almost served as the final nail in the coffin.”
Bryan Perrie, the Concrete Institute’s managing director, said the cement sector was only operating at 60% of its capacity, which translated to 12 million tonnes of cement being produced annually.
“There were many underlying issues that the industry endured from illegal third-party dealers to cheap imports from Pakistan, China and Vietnam. The market was flooded to the point that it was dumping.
“Nobody was buying local as the foreign cement was cheaper as they were not subjected to local taxes and regulations. But the quality was questionable,” said Perrie.
He said they engaged in discussions with government to implement safeguards such as general import tariffs and sanctions for countries.
“We put our faith in government and only time will tell. We have made applications, sent information and evidence, we just need support,” he said.
But Perrie saw the government’s recent Sustainable Infrastructure Development Symposium (Sids) as a sign that their cries were being heard.
“The presidency’s recognition that infrastructure was of critical importance to the country’s economic recovery is wonderful.
“Of importance, Sids prioritised cement-intensive network industries such as energy, water and transport, particularly given their multiplier and job-generative effects. These are all steps in the right direction.”
Perrie said there were about 90 000, direct and indirect employees in the cement sector, and that in 2010 lead-up to the Fifa World Cup, more than 250 000 jobs were created.