NewsNorth AfricaInternational expansion has been a steep learning curve - PPC chief


Posted on Monday, 08 September 2014 15:57

International expansion has been a steep learning curve - PPC chief

By Gemma Ware

Pepe Meijer, Managing director, PPC International. Photo©PPC South Africa's PPC has launched a major investment programme that should be completed by 2017 and enable it to compete more with the continental cement giants. Pepe Meijer, Managing director, PPC International, says that aside from West Africa and East Africa, his company has clearly indicated an appetite for North Africa


The Africa Report: PPC has a target to boost foreign revenue outside of South Africa by 40% by 2017. How will you achieve this?

All these markets are new. It has been a steep learning [curve].

Pepe Meijer: Currently, 26% of our revenue comes from outside South Africa, mainly from Zimbabwe. Of the new projects that are currently on the go, one is in Harare, which is a 100tn/hour mill that we are about to start. That will boost Zimbabwe's [current] output of about a 1m tonnes by another 400,000tn because we're partly going to use the additional capacity to replace old mill capacity in Bulawayo.

In Rwanda, we have an operation called CIMERWA very close to the DRC and Burundi borders. There's a current operation doing 100,000tn per annum. We're building a new plant, and we will complete it in this calendar year. We will start producing in the first quarter of 2015. That operation will then produce 600,000tn per annum.

In the DRC, we have started a new plant in a town called Kimpese. The plant will produce 1m tonnes per annum [mtpa]. We'll start producing in June 2016. In Ethiopia, just outside Addis Ababa, we're building a 1.4mtpa plant that will be operational in late 2015 or early 2016.

In Algeria, 300km southeast of Algiers [we're planning] a 2mtpa plant. We're quite advanced in terms of the feasibility study. Foreign investors can retain a maximum of 49% of the shareholdings. We envisage that we'll start construction towards the end of 2014, and it will be commissioned by the end of 2016 or early 2017.

If you look [at our share holdings in these investments], you get 3.3m tonnes of capacity. If you take that as part of the overall capacity of PPC, we believe that we're going to be close to 40%.

In ethiopia, there is quite a big oversupply of cement, and the cost has gone down in the past couple of years. How will you stay profitable there?

We did our calculations on the basis that you're going to get a scenario that the actual production numbers, in terms of efficiency, will lead to demand. The effective production is about 8m tonnes. Habesha, which is our plant, will add about 1.4m. Dangote will add about 1.9m. We believe that the total market in terms of actual production is going to be about 11m eventually.

If you look at the cement consumption per capita, it's 120kg. In South Africa, it's more than double that number. There's still a lot of room for growth from that perspective.

Algeria is often seen by foreign companies as a difficult country to enter. How has it been for you entering that market?

All these markets are new. It has been a steep learning [curve]. It's a market that is short of cement. The current overall capacity is about 18m tonnes. The demand is about 22m, so there's a shortage of about 4mtpa.

The majority of the capacity is state owned, so again, opportunities for efficiencies are there. There's a lot of focus on the infrastructure bill and a lot of investment being channelled in that direction.

What other regions or countries are you interested in entering?

We've clearly indicated our appetite for North Africa. Certainly, in terms of our drive, we are still focused on West Africa and East Africa. Rwanda is well aligned to the eastern side of DRC and obviously to the Burundi area. Uganda, Kenya and Tanzania – that's an area that we are seriously considering.

However, it's becoming very competitive, particularly Kenya. West Africa is the area where we haven't really set our flag down yet. Ghana is still a country to look at. Nigeria is not to be excluded. And then the surrounding countries – Niger is also getting to the front in terms of opportunities and so is Mali.

If you look at our balance sheet, in terms of the alignment, we're looking at most probably another one or two projects within the next 12 months before we have to stabilise and consolidate for the next two or three years. ●

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