The Sunday News
Dumisani Nsingo, Senior Business Reporter
PLAYERS in the country’s cement industry have invested close to US$200 million in the last five years towards enhancing their production efficiencies.
According to a Zimbabwe Cement Industry 2019 position paper, which Sunday News Business is in possession of, apart from setting up plants, the country’s five operational cement firms have injected US$195 million towards recapitalising their operations in the last five-years.
“Cement players have invested an additional US$195 million over the past five years in kiln upgrades, packing, grinding station and other cement processes in order to add efficiency to the existing equipment and to reduce the cost of manufacturing,” read part of the statement.
The cement industry constitutes Pretoria Portland Cement Zimbabwe, Lafarge Cement Zimbabwe, Sino-Zimbabwe Cement, Livetouch and Pacstar Cement. Sino has finished a significant upgrade at a cost of approximately US$4 million and a new investment in a brick factory making a total of US$25 million in the last five years.
PPC has invested US$53 million since 2010 on the kiln and mill upgrades and quarry optimisation at its two operations and is setting up a new grinding plant in Harare at a cost of more than US$80 million. Lafarge invested US$37 million over the past five years in quarry rehabilitation and equipment, cooler upgrade and systems automation.
“The cement industry in Zimbabwe is heavily invested, thus the need for local players to secure a return on these investments,” read the paper.
The position paper also stated factors adversely affecting Zimbabwe cement industry’s competitiveness when compared to other regional players. According to the cement players, the country is disadvantaged and vulnerable, especially when exposed to South Africa and Zambia cement imports.
“The top five contributors to Zimbabwe’s adverse cost of production are logistic services, maintenance, consumables, packaging and power. However, protection by Government of Zimbabwe provides relief to the industry, except for smuggled stock,” said industry.
The assessment was done in order to inform recommendation of measures that seek to address the threat imports posed on sustainable operation of local cement industry. Zimbabwe cement industry is a significant contributor to economic growth, employment creation and trade. Without this industry, cement would have to be imported in large quantities thereby increasing demand for the scarce foreign currency. Given the significant role that the industry plays, all regional countries, with the exception of South Africa and Zambia, have adopted tariff measures to protect their cement industries from imports. The cement players are pushing Government to put further protectionist measures to protect the industry from imports.
“Zimbabwe attracts imported cement due to the high selling price in the market and excess capacity in the region. This poses a serious threat to the local market as regional players will find it lucrative to export into Zimbabwe without fully recovering their costs. The industry is therefore requesting for ‘protection’ from imported cement until such a time that the playing field is even with cost drivers in local production having been revised to competitive levels,” read the paper.
South Africa, Zambia and Mozambique pose the highest threat of their cement products being exported into Zimbabwe, because of the huge excess capacity they have.
“Zambia enjoys tariff exemptions because of its membership to Comesa (Common Market for Eastern and Southern Africa). This makes Zambian cement the biggest threat to Zimbabwean cement industry. Given the cost comparison figures, Zambian producers should not be landing cement competitively in Harare unless if their product is sold at variable cost or some other form of discount. On the other hand, Zimbabwe cement industry cannot profitably export cement into Zambia as cement prices obtaining there are not attractive,” read the paper.
Zambia has seen a proliferation of cement plants in the last five years resulting in a price squeeze and aggressive exporting efforts into neighbouring countries. Industry further indicated that Mozambique has significant overcapacity, which ordinarily would have posed a threat of imports into Zimbabwe, however, their cost of production is high as they import their clinker. High logistics cost into the Zimbabwean market make it difficult for them to land cement competitively.
“Zimbabwean cement industry can no longer export into Mozambique competitively after their Government introduced a restrictive tariff two years ago,” industry noted.
Export opportunities appear to be limited because of the increasing production capacities in the region as well as the characteristics of cement that usually prevents it from being transported over long distances. There is also protectionist behaviour in the region despite commitments to regional integration and free trade agreements. The country’s cement demand is estimated at 1,4 million tonnes per year and cement production capacity is about 2,6 million tonnes per year.
“Zimbabwe has sufficient capacity to meet current demand, estimated at 1,4 metric tonnes per year, however, this cement demand is seasonal, a factor, which may lead to constrained supply during peak periods, like what happened in 2018. The constraint during this peak season is clinker availability and not grinding capacity. Should the current clinker capacity of 1,15 metric tonnes be exhausted, cement industry is able to import clinker to augment local manufacture and thereby fully supply local demand. This clinker capacity produces about 1,7 metric tonnes of cement, which is higher than the current demand of 1,4 metric tonnes,” industry said. – @DNsingo
