Estimates are that southern Africa will need about 24Mt of cement a year by 2014. Question is whether local cement industry can deliver.
Projected demand derives from the average economic forecasts of leading banks and economists and significant infrastructure development with the government targeting 4,5%-6% gross domestic product (GDP) growth a year and gross fixed-capital formation of 25% of GDP by 2014.
Analysts estimate the Gautrain project alone will consume 400000 tons of cement over four years, while the Gauteng market uses 6Mta.
The five new soccer stadiums are expected to take 170000 tons of cement, and upgrading existing stadiums 60,000t.
Early this year, local building material suppliers were forced to import cement for the first time in a quarter of a century to meet rising demand. Cement producers buried their heads in the sand, denying there was a crisis. Even this time round, Pretoria Portland Cement (PPC) CEO John Gomersall says there will be no crisis in 2014 as the industry is increasing capacity to meet projected demand.
Local producers PPC, Afrisam, Lafarge and Cimpor currently produce 14.8Mta. They need to increase capacity by 8.3Mt by 2014, which translates to a yearly rise of 1.18Mt.
Industry players claim capacity plans are in place and some are under investigation to meet 2014’s 24Mt target. Gomersall says the industry will bring 2,25Mt of new capacity on line by the middle of next year, leaving a 6-million ton deficit. PPC plans to expand production from the current 6,9-million tons a year to 8,4-million tons by mid-2009. These increases, Gomersall says, will come from his group’s R1,4bn Dwaalboom Batsweledi expansion project in Limpopo and the R604m upgrade at its Hercules plant in Pretoria, which will boost capacity by 1.6Mt a year by mid-2009.
Orascom CEO Nassef Sawiris whose company invested R3,1bn in a new cement plant with a 2Mt capacity in Mafikeng, North West, last month, said he estimated demand for cement would rise 5%-10%, fuelled by accelerating economic growth.
This Mafikeng plant will only begin production in 2010. Mining empowerment company Sephaku Holdings also announced a R2,5bn in a cement plant with a 2-million ton capacity. This plant will also only start production in 2010.
If the industry fails to meet the demand by 2014, we might just have to import again, which will send building material prices sky high.