South Africa cement shake-up looms

South Africa cement shake-up looms
Published: 31 August 2007

South Africa’s domestic cement market is facing its biggest shake-up since the break-up of the cartel between the three biggest producers in the early 1990s.

This follows yesterday’s announcement by Cairo-based Orascom Construction Industries (OCI) that it and its local partners would invest about R3.2bn in a new cement plant in North West.

With an annual capacity of 2Mt, the plant will be built and operated by Mafikeng Cement Company (MCC) and will start production in 2010.

This investment is happening despite new, multibillion-rand capacity expansion projects already started by established industry players. These include the R1.4bn Dwaalboom Batsweledi expansion in Limpopo by Pretoria Portland Cement (PPC), along with the R604m upgrade at its Hercules plant in Pretoria, which will increase its capacity by 1.6Mta by mid-2009; Lafarge South Africa’s R1.2bn increase of its cement capacity by 1Mta; and Natal Portland Cement’s R800m expansion at its Simuma plant, which is likely to eliminate most of the cement imports to KwaZulu-Natal.

Analyst Gavin Bantam said the MCC project was a "brave move" because the plant’s location meant MCC would take on the three major players - PPC, Lafarge and Holcim - in their strongest market.

"But they [MCC] are a multinational company and I assume they know what they are doing, as they are active in other developing markets and have the credentials to build and operate such a plant."

Bantam said the new project would shake up the domestic market by limiting price rises, "because cement is a commodity product".