Construction, steel and cement group Aveng will spend R1bn-R2bn to increase capacity in its cement operations in a bid to meet soaring infrastructural demand.
CEO Carl Grim said the board had recently approved the investment. Now it is only a matter of where and when it will be spent. He said the group had imported 800,000t of cement last year because of chronic shortages, and would continue importing this year. The group’s capacity is 500,000t because Aveng did not foresee the current peak in the cycle caused by the government’s sudden increase in infrastructure spending.
Grim said most of its cement went towards satisfying consumer demand, with 50% going to residential property and 25% to nonresidential infra-structure.
He blamed the government for the current chaos in the construction industry, where suddenly every company was scrambling to increase capacity because of the sudden extraordinary peak in demand.
The one thing we would like to see the government do is to flatten the cycle to ensure stability in the industry. What they (the government) have done with the 2010 project is the opposite. They have peaked the cycle, said Grim.
He said that after the cycle, which he predicted would last for seven years, companies would again be scraping the barrel for small jobs, as they had done for the past 30 years.
The government needs to learn to plan ahead so that spending is continuous over a long period. This will stabilise the industry, lower costs and improve efficiencies, said Grim.
Buzwe Yafele, business development executive at Aveng, said the biggest challenge with government and Eskom was the inability to make decisions.
They have moderately experienced managers who can’t take crucial financial decisions when required, said Yafele.
Heavy construction continues to be the group’s mainstay, swelling its order book to R15,6bn from R11,3bn in 2005.
Aveng has renewed its advisory caution issued to shareholders in August, following an announcement by Holcim Switzerland that it had entered into discussions which could lead to the sale of 85% of its 54% interest in Holcim SA to a black empowerment partner.
Aveng holds 46% in Holcim SA.
Grim said the two companies were engaged in constructive discussions over the deal.