PPC, IDC enter Ethiopian cement market
26 July 2012
South Africa's Pretoria Portland Cement (PPC) and the Industrial Development Corporation (IDC) have teamed up to acquire a 47% equity stake in Ethiopia's Habesha Cement Share Company (HCSCo), and will help build a US$130-million cement plant in the east African country.
PPC announced on Wednesday that it was investing $12-million in cash to secure 27% equity in HCSCo - the company's first foray into the east African cement market. The IDC will invest $9-million for a 20% equity stake in HCSCo.
"We are on record that our strategy is to grow our revenue earned outside of South Africa to 40-50% during the next few years and that we have been working on various opportunities on the African continent," PPC CEO Paul Stuiver said in a statement. "This is one of those opportunities, and we look forward to a growing contribution and partnership with Habesha in the years ahead."
PPC said HCSCo was a "first of its kind cement share company in Ethiopia, with more than 16 000 local shareholders".
State-of-the-art cement plant
The first phase of HCSCo's plan is a $130-million, state-of-the-art cement plant with an annual capacity of 1.4-million tons to supply the growing Ethiopian cement market.
The plant will be financed from the equity investments of local shareholders, PPC and the IDC, as well as $86-million in debt financing that HCSCo has secured from the Development Bank of Ethiopia.
According to PPC, the HCSCo 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, and future development plans includes an option to double the plant's capacity to 2.8-million tons per annum.
During the initial construction phases, PPC will assist HCSCo by providing operational and technical expertise and by training plant personnel at its operations and in the PPC Academy in South Africa.
One of Africa's fastest-growing economies
With a population of about 85-million, Ethiopia is one of Africa's most populous countries, as well as one of its fastest-growing economies. 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 advisers," Stuiver said. "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."
PPC is the leading supplier of cement in southern Africa, with eight cement manufacturing facilities and three milling depots in South Africa, Botswana and Zimbabwe with total capacity of eight million tons cement annually.
PPC also produces aggregates, metallurgical-grade lime, burnt dolomite and limestone, and exports cement and lime to various African countries.