South Africa's PPC invests in Ethiopian cement firm

South Africa's PPC invests in Ethiopian cement firm

South Africa's Pretoria Portland Cement and a state investment body South Africa’s Industrial Development Corporation (IDC) have jointly secured a 47 per cent equity stake in the Habesha Cement Share Company (HCSCo) of Ethiopia.

PPC’s US$12m cash investment secures 27 per cent in HCSCo and is a significant step in PPC’s African expansion strategy. This is PPC’s first investment into the Ethiopian and east African cement market. The IDC will simultaneously invest US$9m for a 20 per cent stake in HCSCo.

“We are on record that our strategy is to grow our revenue earned outside of South Africa to 40-50 per cent during the next few years and that we have been working on various opportunities on the African continent. This is one of those opportunities and we look forward to a growing contribution and partnership with Habesha in the years ahead.” said Paul Stuiver, PPC CEO.

HCSCo is a first of its kind cement share company in Ethiopia, with more than 16,000 local shareholders. Appropriately named Habesha, an Ethiopian term for the unity of its people, the first phase of HCSCo’s plan is a US$130m state of the art cement plant with a capacity of 1.4Mta to supply the growing Ethiopian cement market. The  plant, which is currently in the early stages of construction, is located 35km North West of Addis Ababa. Cement production is planned to commence during the first half of 2014. The plant’s future development plan includes an option to double the capacity to 2.8Mta.

In addition to the equity investments by local shareholders, PPC and the IDC, HCSCo has secured US US$86m debt financing from the Development Bank of Ethiopia.

During the initial construction phases PPC will assist HCSCo by providing operational and technical expertise and with the training of plant personnel at its operations and in the PPC Academy in South Africa.

Ethiopia, with a population of about 85 million is one of the most populous countries in Africa and has one of the fastest growing economies on the continent. Infrastructure development is high on the country’s agenda and the government has embarked on a significant housing reform programme.

“During my visits to Ethiopia I have been impressed with the professionalism of Habesha management and their advisors. They have significant experience in the cement industry and we have already built great relationships. The country’s current investment plans, combined with one of the fastest growing cement demands in Africa, makes us extremely confident about the sustainability and growth of this investment.” concluded Stuiver.