Nigeria-SA deal for cement plant in North West

Nigeria-SA deal for cement plant in North West
Published: 13 October 2008

Nigeria’s leading cement and building materials firm, Dangote Cement, and Sephaku Cement, have signed a shareholders agreement paving the way for the start of a R3bn project to build a cement plant in North West.

The agreement, announced on Friday, is the second leg of Dangote’s strategy to enter the highly lucrative South African market, following its acquisition of a 19.8 per cent stake through a private placement in Sephaku Cement in April. The Nigerian firm hopes to increase its stake to 45 per cent eventually.

The partners said they now had the operational framework to kick-start the project, which they billed as the first black-owned cement plant in SA. It would have an annual capacity of 2.2Mt. They said talks were being held with technical partners before construction started.

Sephaku Cement is a subsidiary of black economic empowerment- controlled Sephaku Holdings, which has interests in the mineral sector. Dangote Cement is part of Nigeria’s largest diversified group, Dangote Industries, and also has operations in Benin, Ghana, Senegal and SA. The company said it aimed to be a multinational corporation and was eyeing at least 10 more African countries.

The two partners said the South African plant would be the largest single-line cement plant in the country. Construction would begin in January and the first cement should be ready for delivery by the end of 2010.
Sephaku Holdings, as the majority shareholder in Sephaku Cement with a 55 per cent stake, would provide the majority of the management team, and was finalising debt funding needed to finance the project.
Demand for cement in SA is set to continue to rise due to a slew of billion rand construction projects, among them the government’s road-building programme, privately owned shopping complexes, and infrastructure and stadiums to meet the influx of visitors for the 2010 Soccer World Cup.

Analysts say despite the lull in housing construction in response to tightening credit conditions and waning demand as cash-strapped consumers prefer to rent, construction firms such as Group 5 and Murrary & Roberts have full order books that should keep them busy beyond 2010.

Dangote Cement CEO Tony Hadley said the joint venture was a key part of his group’s pan-African expansion programme and provided direct access to the large South African market.

“We are delighted to be announcing that the joint venture is moving ahead smoothly and look forward to beginning the construction process,” he said.

“Dangote Cement is set to achieve 26Mt of production capacity in Nigeria by 2010 and 50Mt of production capacity overall by 2012.”

Sephaku Holdings chairman Lelau Mohuba said his group had a broader vision to become a major player in the local economy and across Africa.

He said the new plant was the first black-owned plant in SA and marked a “critical milestone (for the group) which was growing from exploration to development.”

Sephaku Cement CEO Pieter Fourie said despite a slowdown in demand for cement since record levels achieved last year, the medium- to long-term forecast showed significant growth opportunities in the local market.