PPC says cement imports could cost Zim US$50m

Oliver Kazunga-Senior Business Reporter

LEADING cement manufacturer, Pretoria Portland Cement (PPC) Zimbabwe says the country could lose an estimated US$50 million annually of scarce foreign currency if cement imports continue to flood the market.

In October last year, when the local supply fell below what was expected, there were shortages and the Government issued temporary permits for cement imports.

However, authorities discontinued the import permits in March this year when local production increased to satisfy national demand.

Despite discontinued cement import permits, the local market continues to be flooded with smuggled cement from across the region.

Addressing a press conference in Harare on Friday, PPC Zimbabwe managing director Mr Albert Sigei said at an industry level, the local cement manufacturers had more than sufficient installed capacity to meet the country’s demands.

The local cement industry which has four major players including Khayah Cement, and Sino-Zimbabwe is reportedly producing a combined 160 500 tonnes per month, against an installed capacity of 241 000 tonnes per month.

“The installed cement grinding capacity in the country is just over three million tonnes versus an annual estimated demand of about 1,8 million tonnes.

“Despite this, we have continued to witness a massive influx of imports into the country.

“And in our estimation, if the imports continue coming at the rate at which they are coming today, the country will unnecessarily lose about more than US$50 million dollars of scarce forex which could be satisfied with local production unless firm action is taken to curb these imports,” he said.

Presently, Mr Sigei said, monthly cement imports are averaging between 35 000 and 45 000 tonnes.

He said the imports enjoy an unfair advantage compared to local players taking into account that the importers have not made any investments.

“And this could ultimately lead to a slowing down of local manufacturing leading to job losses as the cement grinding capacity may not become fully utilised.

“And we have a lot of engagements with the relevant authorities and we are getting support, hopefully, we’ll see a resolution of this issue,” said Mr Sigei.

In August 2015, PPC Zimbabwe announced that it had invested US$80 million in the construction of its 700 000 tonnes per annum Harare plant — the firm’s second factory in the country.

The company, which also has a clinker plant in Colleen Bawn, Matabeleland South Province owns another factory that also has an installed capacity of 700 000 tonnes annually in Bulawayo. Clinker is one of the major raw materials used in the production of cement.

Both Harare and Bulawayo plants are presently operating at 70 percent capacity utilisation.

“Other challenges faced by our industry include a high-cost environment compared to our peers in the region, especially cost of power, transportation and manpower.

“These challenges were exacerbated by recent policy changes that had an adverse impact on our sales coupled with difficulties emanating from local currency stability.”

Mr Sigei said their first half-year to September 30, 2024, was a difficult period with revenues recording a decline of 9 percent versus the prior year and this was primarily due to influx of imports which were not allowed into Zimbabwe in the comparative period.

“A rigorous cost savings programme was therefore implemented by the company to counter the lower revenues. “This resulted in our Earnings Before Interest Tax and Amortisation (EBITDA) dropping by a lower rate of 4 percent and improvement in EBITDA margin by close to 2 percent.”

He said the cement industry would continue to be challenged by the significant cost escalation on critical cost drivers such as electricity, input materials transportation and manpower.

As a result, the firm will continue implementing its program to optimize costs and improve efficiency to recover profitability to prior year level by the end of the financial year.

“Areas covered under the programme include cost of key inputs, transport costs, fixed costs and overheads on top of an enhanced focus on operational efficiency and innovation.

“As part of the strategy, PPC Zimbabwe considered retrenchment of some employees that were in positions that would have become redundant after implementation of a simplified organisation structure.

“This option was, however, not implemented and other cost containment measures favoured instead, considering the economic environment in Zimbabwe and impact on employees,” said Mr Sigei, adding that the measures being taken by his organisation were important for profitability improvement and to secure sustainability into the future.