South African cement industry booming

While inadequate infrastructure may be the single biggest threat to Africa’s long-term growth, at the same time it also represents a significant opportunity for investors to finance physical infrastructure assets such as ports, railway lines, toll roads, power stations, hospitals, and broadband ICT.

With governments across the continent committing billions of dollars to infrastructure, Africa is at the start of a 20 to 30-year infrastructure development boom. The strategic importance of the cement sector will play a key role in these government’s infrastructure rollout plans, which are going to require a sustainable supply of cement if their ambitious targets are to be met. It is expected that these rapid infrastructure developments in Southern Africa will brighten the prospects of the cement industry in the region.

Cement production stood at 14.9 million tonnes in 2012 and is expected to reach 18.1 million tonnes in 2018 – owing to the addition of new cement manufacturing plants in South Africa, Zambia, and Zimbabwe.

Higher government spending on public infrastructure, such as the construction of new energy and power facilities, as well as the expansion of transportation infrastructure, is playing a role in the increased demand.

This rising demand for cement opened up an opportunity for a new player in the market. Nigerian-backed Sephaku Cement will be the first new entrant to the South African cement production market to open its own new plant since 1934 and will be looking to challenge big local producers PPC, AfriSam, NPC and French multinational Lafarge as the country’s infrastructure-building program starts to take off.

Sephaku Cement has recently commenced production at their newly build state-of-the-art milling plant in Delmas. Another plant Aganang is being developed in the North West Province and is expected to commence production in the second quarter of 2014. Sephaku said its plants used the latest cement-making technology. This reduced power consumption and improved general environmental control. This is the first time the Nigerian cement giant will be producing cement in the same country as its competitor in sub-Saharan Africa.

An increase in demand for cement is a good indication that the construction industry is slowly recovering with confidence at a five-year high at the end of last year. This is despite the fact that government infrastructure plans have largely stalled.

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