Special report: invigorating Africa’s industrialisation

The &lsquo;Africa Rising&rsquo; narrative is one that has captivated both the West and the East &ndash; and their multinationals &ndash; for a number of years. It is also one that, arguably, has distracted from the reality experienced across much of the continent since July 2014: a significant and far-reaching downturn in the so-called commodity super-cycle; persistent uncertainty in growth prospects in many developed and developing countries; and stronger global economic headwinds.1 This has had major developmental implications for several of the continent&rsquo;s economies, as well as the companies investing in them.2 Given that industrialisation is the pathway to sustainable development, it is important to critically understand where Africa &ndash; and indeed sub-Saharan Africa &ndash; finds itself as a world region in this regard, and why. The 2016 Mo Ibrahim Foundation Report on 10 years of governance on the continent highlights two startling facts: not only is Africa currently the most unequal region on the planet, it is also the poorest producer on the planet. Africa today has the lowest manufacturing share in GDP growth among all emerging market regions. Despite the continent&rsquo;s strong exports of minerals and oil in previous decades, its sluggish pace of industrialisation and beneficiation has resulted in the region&rsquo;s shrinking share in world trade.1 Africa&rsquo;s exports, as a share of the world&rsquo;s total, have dropped from around 4.0% in 1970 to 2.45% in 2014. This is in stark contrast to emerging Asia&rsquo;s share, which rose from around 3.0% to over 20% in this same period.3With a looming debt crisis, captured capital, rising regulatory, political, governance and currency risks, and persistently low commodity prices all actively challenging the growth narrative, what does this mean for players on the continent, and what is the potential impact on those linked to the infrastructure and development space? Could it be that manufacturing, of the type that PPC is both investing in and unlocking across supply chains, is the first step towards this much-needed continental industrialisation? The role of PPCPPC&rsquo;s investment in the continent is an extensive one. As a company that started in South Africa 125 years ago, its subsequent expansion and investment in the sub-Saharan region began in earnest in Botswana in 1996, when PPC&rsquo;s blending plant was commissioned. This was followed by a move into Zimbabwe in 2001, with the acquisition of Portland Holdings. In the 16 years since, the company has subsequently grown its footprint to include a 35% stake in Habesha Cement in Ethiopia; a 51% stake in CIMERWA, Rwanda; 69% of a new cement plant in the Democratic Republic of the Congo (currently undergoing final testing), and a new mill in Harare, Zimbabwe, commissioned in 2016. Work on a US$24 million (ZAR1.7 billion), 1 million tpy kiln at Slurry (SK9), in the North West province of South Africa, is on schedule. This makes PPC a truly African brand.While PPC&rsquo;s expansion has not been without very real challenges, it has been, and remains, rooted in the opportunity that has always been seen in Africa. The company&rsquo;s experience has already shown that partnerships that get the basics right from the beginning can unlock numerous synergies and efficiencies, and thereby the potential of regions. These partnerships must be both meaningful and mutually beneficial to work, however, as well as based on reliable insights and data. Additionally, they have to be long term, taking at least a 20 year plus view and demonstrating a real investment and commitment.In tracking PPC&rsquo;s progress and growth on the continent, one immediately notes the strategic positioning of its plants from a geographical perspective. While border proximity is key in certain areas because of export opportunities, perhaps more important is their location relative to some of the continent&rsquo;s most dynamic and rapidly-growing cities: strategic nodes that are catalysing infrastructure and development.The past decade has seen a massive change in the continent&rsquo;s cities, with most being forced to evolve like never before, given the constant influx of new residents and job seekers. Although Africa remains the last continent where most of the total population is rural, rapid urbanisation means that by 2035 the majority of its people will live in cities.1 As such, cities act as invaluable indicators for determining an expansion roadmap. To this end, PPC leverages benchmarks, including financial access, infrastructure, health and education, economic opportunity, and the ability of a city to attract investment, as measures of urban potential.While it is one thing following infrastructure investment nodes, PPC also views itself as a catalyst for the development of micro nodes within these regions. This is because the construction or upgrade of any cement plant typically requires the initial development of roads (and later logistics routes and suppliers), the installation of new (or additional) energy and power infrastructure, as well as water infrastructure. In most instances, it makes direct investments into these. The subsequent commissioning of a plant and start of production also needs to be recognised as introducing a new source of manufacturing, and consequent industrialisation, in an area. In a similar way, this then opens the door for related secondary light manufacturers and industries to consider setting up shop nearby. As such, investing in a cement plant in Africa is about far more than simply creating new capacity and a route to new markets. If the investment is structured and managed appropriately and responsibly, it can fundamentally shift the growth trajectory of the immediate region.This type of thinking &ndash; and, indeed, approach &ndash; is critical if one considers that the public sector in general is currently struggling to maintain its spending on infrastructure and capital projects. New factors, including drought, security concerns, and rapid urbanisation, coupled with falling government revenues, are making it difficult to maintain the spending on infrastructure required in many countries. Between 2015 and 2016, for example, Southern Africa has seen the number of construction projects in the region decrease from 109 to 85 &ndash; with a drop in investment value from US$140 billion to US$93.4 billion. (This follows the trend noted between 2013 and 2014, where projects decreased in number from 124 to 119, but does not correlate with project value, which increased from US$83.2 billion to US$144.9 billion during the same period.)East Africa (where PPC&rsquo;s plants in Ethiopia and Rwanda are located) shows an ongoing declining investment trend. While 2015 saw 61 projects in the collective region, valued at US$57.5 billion, in 2016 this had decreased to 43, with investment halving to US$27.4 billion. This is in line with what was seen between 2013 and 2014: with 93 projects valued at US$67.7 billion in 2013 and 51 projects valued at US$60.7 billion in 2014.2PPC Barnet, Democratic Republic of the CongoCement plant construction at PPC&rsquo;s 1 million tpy plant is now complete, with hot commissioning underway. Local electricity provider SNEL (Soci&eacute;t&eacute; Nationale d&rsquo;Electricit&eacute;) constructed a 13 km overhead transmission line to the plant to ensure a continuous supply of power. This has had positive and far-reaching consequences for the area, as the line is the first leg of a new rural power supply. Village construction also remains an ongoing focus, and an additional 15 houses were made ready for occupation in December. Plant storm water construction has been completed.PPC Msasa, ZimbabweValued at US$82 million, PPC&rsquo;s new Msasa mill was completed on time, under budget, and without a single lost time injury (LTI). It is set to be officially opened by the presidency in the coming months.The 700 000 tpy Harare mill has positioned PPC to support growth in the Harare urban node. Here again, site location will directly benefit customers from a delivery perspective. Improved logistics costs, (as transportation of clinker by rail from Bulawayo to Harare is significantly cheaper than transportation of cement by road), as well as the ability to source limestone and gypsum close to the factory, mean that the operation will be far more efficient and is well placed to support ongoing expansion and industrialisation of the city and surrounds.Habesha, EthiopiaConstruction on the 1.4 million tpy Habesha plant outside Addis Ababa is at an advanced stage and scheduled for commissioning 1H17.The plant&rsquo;s construction is supported by community infrastructure and upliftment programmes, including schools, and water and sanitation projects. As Habesha nears commissioning, PPC&rsquo;s focus is shifting from project implementation to operations, and achieving maximum ramp-up without disrupting the market.PPC Slurry SK9Work on the 1 million tpy kiln at Slurry (SK9) in South Africa is on schedule. Leading technology features have been incorporated into the kiln design so as to optimise production, reduce heat and electrical energy consumption, and increase plant availability when the project is commissioned and ramps-up in 2018. These include a six-stage preheater with an in-line calciner and a multi-channel burner. The latest generation walking floor grate-type cooler technology being used will improve the heat recovery of the kiln system to an impressive 74%.ConclusionWith Africa&rsquo;s cities having a combined population of 200 million people, a US$1 trillion GDP, half a trillion US dollars&rsquo; consumer spend, 17 million middle income households and 80% of the continent&rsquo;s high income households,1 it is not difficult to see why PPC still considers it a place of vast opportunity. As manufacturers continue to invest in their own and in supporting regional infrastructure, they need to work with all stakeholders and relevant governments to assist countries in reducing their dependence on external demand, and become more independent, diverse suppliers. In this way the African brand will assist the greater region to take sustainable steps towards ongoing and future industrialisation.References2015 Mastercard African Cities Growth Index, (2015). &lsquo;Africa&rsquo;s changing infrastructure landscape&rsquo;, Africa Construction Trends Report, (Deloitte; 2017). Data from UNCTAD (United Nations Conference on Trade and Development).This article first appeared in the April 2017 issue of World Cement.

Special report: invigorating Africa’s industrialisation

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