Sub-Saharan Selection: Introductory Overview

Introduction

The World Bank predicts that economic growth in Sub-Saharan Africa (SSA) will accelerate to 5.2% this year, driven by increasing investment to exploit the region’s natural resources and develop infrastructure. The region attracted foreign direct investment (FDI) of US$43 billion last year, up from US$37 billion in 2012. This was not only fuelled by oil and gas discoveries in Angola, Mozambique and Tanzania, but also by non-resource-rich countries such as Ethiopia and Rwanda.

SSA countries are among the fastest growing in the world. Growth was strong in resource-rich countries, including Sierra Leone and the Democratic Republic of Congo, due to higher production in the mining sector. Non-resource countries, particularly Ethiopia and Tanzania, also experienced solid economic growth in 2013.

Makhtar Diop, the World Bank’s Vice President for Africa, says that ‘Poor infrastructure will continue to limit Sub-Saharan Africa’s growth potential. Significantly more infrastructure spending is needed in most countries in the region if they are to achieve a lasting transformation of their economies.’

The construction and building sectors, as part of a country’s infrastructure development, present many challenges for the building materials market, especially where cement is involved. Domestic investment is often insufficient in many countries, which means we are seeing a number of foreign investors entering the local markets, often as joint investment partners.

As an example of external interest, look at the Dubai-based company Osho Ventures. With offices in South Africa and Namibia, it regards SSA as one of the most attractive regions from a growth perspective. It aspires to become a significant force in the cement industry, not only in the SSA region, but also elsewhere in Africa. It claims to have identified six locations in Southern Africa to build cement grinding plants. It has also been awarded licences to develop limestone quarries in Mozambique, Madagascar and South Africa. And of course, as reported many times in World Cement and at www.worldcement.com, Nigeria’s Dangote Group is heavily involved in building cement plants across Africa.

Three to watch

Frost and Sullivan’s study, Southern African Cement Industry Production and Investment Forecasts (2013), has predicted that US$940 million will be invested in the cement industries in South Africa, Zambia and Zimbabwe between 2013 and 2018. Cement production will be instrumental to government expenditure plans, especially the Regional Infrastructure Development Master Plan that the Southern African Development Community (SADC) wants to roll out over the next 15 years.

As reported in June, Lafarge will combine its South African business with Lafarge Wapco, Nigeria, to form a new company that will be known as Lafarge Africa. The combined company will have nationwide coverage in Nigeria and South Africa, with the capacity to produce about 12 million t of cement. This combination of Nigerian and South African assets will compete with the Dangote Group’s expansion projects across Africa.

The completion of Sephaku Cement’s new plant in South Africa has added an additional 2.5 million tpa into the cement market. In addition to becoming a competitor to the new Lafarge Cement arrangement, it is also challenging the established companies such as PPC, AfriSam and NPC.

News released by Nedbank Capital and the Bank of China Johannesburg in May confirmed that Jidong Development Group will enter the South African market with the construction of a R1.8 billion, 1 million tpa plant (Mamba Cement) in Limpopo province. Nedbank Capital say, ‘The new investment in Mamba Cement will result in a major improvement in basic infrastructure such as power and roads, and these will create jobs and provide opportunities for small suppliers for companies north of Brits.’

While that news is welcome, unemployment in South Africa is still very high and poverty and inequality still remain major issues. The South African government is planning to spend over R4 trillion on a massive state-led infrastructure drive over the coming years, with substantial focus on rail, energy and infrastructure. One hopes that such a move will go a long way to the government’s objective of creating 5 million jobs over the next decade.

Despite robust economic performance in Zambia, poverty remains extremely high at about 60%. Real GDP growth is projected to increase to 7.1% this year and 7.4% in 2015. The government’s main areas of policy are to create employment opportunities, especially for the young. Infrastructure investment – in mining, power generation and roads – will ensure growth remains strong. On the cement scene, cement production should soon reach 2.5 million tpa once the new 1.2 million tpa Dangote plant in Ndola comes onstream. This will add to the 1.5 million tpa of cement produced by Lafarge Zambia’s plants and by the Zambezi Portland plant in Ndola.

Professor Sam Mayo, Executive Director of the African Institute for Agrarian Studies, speaking at the launch of the Economic Development in Africa Report 2014 in June of this year, said: ‘To make significant progress in reducing poverty, the Zimbabwean government will have to sustain average growth rates of about 7% and above in the medium to long-term and this will require minimum investment rates of 25% of GDP’. The country’s investment rate currently stands at 14.6% of GDP – well below that suggested rate. Despite the depressed economic performance, Zimbabwe has seen a slight increase in the levels of private sector investment. Well, the cement industry is trying hard to raise the level against prevailing tight liquidity challenges. For example, Lafarge Cement Zimbabwe is expected to increase production to 0.5 million tpa once the current plant upgrade is completed. The company’s Chief Executive, Mrs Amai Tantawi, recently stated, ‘This year and the next we will be focusing on projects that will increase capacity. Feasibility studies are being conducted on long-term projects and we hope this will see the business growing in the future.’ Earlier this year, Sino-Zimbabwe Cement Company said it was confident of meeting its targeted production capacity of 700 – 1200 tpd following the completion of the first phase of its plant upgrade at Gweru.

Read part two here.

Written by Paul Maxwell-Cook. This is an abridged version of the full article, which appeared in the September 2014 issue of World Cement. Subscribers can view the full article by logging in.

Sources

• Company news and press information.
• African Economic Outlook.
• allAfrica.com.
• World Bank.
• pwc Global.
• Lusaki Times.
• The Herald (Zimbabwe).
• Lusaki Times (Zambia).
• worldconstruction.com.

Read the article online at: https://www.worldcement.com/africa-middle-east/03092014/sub-saharan-selection-402/