How it affects South Africa's Economy - LONMIN BUILD TRENDS
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Build with Confidence
BUILD TRENDS
August 2012 Issue 141
LONMIN
How it affects South Africa’s
Economy
SA Economic Indicators Government Corruption Bitumen Shortage
Build Trends Page 1
South African Economic Indicators
Consumer Price Index (CPI) Producer Price Index (PPI) FNB/RMB/BER Confidence Index
Building
2011 2012 2011 2012
Jan 3.7 6.3 Jan 5.5 8.9 2011 2012
Feb 3.7 6.1 Feb 6.7 8.3 Q1 24 34
Mar 4.1 6.0 Mar 7.3 7.2 Q2 24 27
Apr 4.2 6.1 Apr 6.6 6.6 Q3 23
May 4.6 5.7 May 6.9 6.6 Q4 29
Jun 5.0 5.5 Jun 7.4 6.6
Jul 5.3 4.9 Jul 8.9 Business
Aug 5.3 Aug 9.6
2011 2012
Sep 5.7 Sep 10.5
Oct 6.0 Oct 10.6 Q1 55 52
Nov 6.1 Nov 11.1 Q2 48 41
Dec 5.0 Dec 9.8 Q3 39
Ave 4.9 6.0 Ave 8.4 7.5 Q4 26
Source : www.statssa.gov.za
Build Trends Page 2not only negative, but also positive, possible outcomes.
South Africa's Mining Troubles More importantly, regarding the potential pressure on
domestic credit rating agencies to downgrade South
Run Deep Africa's credit rating, the impact on domestic bond yields
appears to have been fairly muted. There has been an
upward trend in domestic bond yields over the past month,
The strikes and violence at Lonmin Marikana platinum mine but this appears to have been more in tandem with an
in South Africa have already carried a high cost: 44 deaths, upward trend in global bond yields as some of the fears
34 after police opened fire on workers demanding higher surrounding the Eurozone debt crisis and its dampening
wages. Some have compared recent events with apartheid- impact on global economic growth, have receded. As for
era violence. As strikes spread to other mines, they could equity markets, the markets have been reaching new
have wider financial ramifications for South Africa. Investors highs, with the exception of the Lonmin share price
should watch closely for signs of further unrest. specifically. There has been an upward spike in the
Mining accounts for about 9% of South Africa's gross platinum price, which means that ironically some of the
domestic product. But despite the country's rich resources, other platinum mines will have benefited from the events at
South Africa has failed to ride the global commodity boom Lonmin. To the extent that there are now wage demands
due to lack of investment in infrastructure. From 2001 to being put by workers at other platinum mines, one could
2008, mining's contribution to the economy rose 19% in argue that the benefits provided by the rise in the platinum
China, 10% in Russia and 7% in Brazil, but fell 1% in South price caused by the Lonmin events, could pave the way for
Africa. other mines acceding to higher wages than might
Investors already have been worried this year by a debate previously have been appropriate.
about nationalization of South African mines, which the The fact of the matter is
ruling African National Congress has said won't happen. The
recent violence may further chill foreign direct investment; Global risk that the domestic financial
indicators have been
net foreign direct investment flows in the year to March 31
stood at just 1.9% of GDP, down from 4.4% at the end of
aversion impacted upon far more by
the generally more
2008, Royal Bank of Scotland notes. positive mood on global financial markets than by the
Politically, too, there could be turbulence. A key factor in the specific tragedy at Lonmin. The fact that bond yields had
troubles at the Marikana mine has been the challenge posed begun rising long before the tensions at Lonmin began
by the Association of Mineworkers and Construction Union, taking hold was a function of improved global financial
or AMCU, to the established National Union of Mineworkers, sentiment, partly on the expectation of renewed monetary
which has close ties to the ANC. The rise of the apparently stimulus in advanced economies. Even though such
more radical AMCU may weaken the ANC, already facing stimulus has not yet been forthcoming in a meaningful
pressure due to its failure to generate jobs. Unemployment way, the mere fact that there is a prospect of it coming on
has been above 20% since 1997, according to the stream is assisting in driving equity and commodity
International Monetary Fund. markets upwards and bond prices downwards. As one of
So far, the immediate financial reaction to the violence has the accompanying tables shows, there has been no real let
been small, a 6.3% rise in platinum prices apart. The rand up in the continuing flow of portfolio investment into South
has softened against the dollar, while government bond African financial assets, especially into domestic bonds,
yields have fallen. But the underlying problems the strikes with the yield on such bonds been attractively substantially
have exposed mean investors can't rely on that calm higher than the yield available on bonds in most other
persisting. countries.
The moral of the story is that South African financial
Source : The Wall Street Journal (South Africa), 24 August indicators are still being influenced far more by what is
2012 going on internationally than by any concerns regarding a
slowdown in investment into the country resulting from
anxiety surrounding the implications of the tragic events at
Marikana tragedy has only minor Marikana.
negative effects on economy However, the bigger concern should relate to fixed
investment in new mines and associated ventures. Even in
this regard, one should not exaggerate the negative
The impact of the Marikana tragedy on key indicators impact. Already for several years, the threats of
relating to the South African economy has been relatively nationalisation and increased government interference in
small. Indeed the Rand depreciated slightly more vis-à-vis the mining industry had been depressing capital
the Dollar than most other currencies, but the extent to which investment in the industry.
it depreciated was actually rather muted. This would seem to The domestic mining industry has been in decline for
justify our assessment that the impact of last week's events several years for reasons referred to above and one is
on domestic economic growth would be minimal in the short therefore left to question whether any further significant
term and was unclear from a longer-term point of view, with damage could have been inflicted by last week's events.
Page 3
Build TrendsThe corollary to this again is that one should not exaggerate "Government has a five-year priority list and a 20-year
the potential damage to overall economic growth emanating project pipeline, which does not help the economy one bit.
from this particular event alone. Instead, one would like to For this reason the private sector holds the key in many
think that last week's events highlighted some of the instances.“
structural defects of the South African economy and in so Luke Doig, senior economist at the Credit Guarantee
doing might work towards generating solutions which in the Insurance Corporation, which underwrites domestic and
longer term could actually be to the benefit of sustainable export credit insurance, said SA‟s private sector had long
growth. been the major contributor to fixed investment. "Only
during 1975 to 1979 did the state‟s contribution to total
Source : Econometrix, 23 August 2012 gross fixed capital formation exceed that of the private
sector," he said. Reserve Bank data showed that in the
first quarter, the private sector‟s contribution to gross fixed
capital formation was 61.5%.
SA jobless rate slows to 24.9% Statistics SA reported that employment in the construction
sector had risen, with 26,000 jobs created in the first
quarter.
South Africa's official jobless rate slowed to 24.9% of the Ms Weimar said while SA‟s economy was growing and
labour force in the second quarter of 2012 from 25.2% in the "officially left the recession behind", growth was limited to a
first quarter, a survey showed. narrow range of industries. "The local economy is growing
In its latest quarterly Labour Force Survey, Statistics South very slowly as a result of exports recovering very, very
Africa said the total number of unemployed people stood at slowly.“
4.47-million in the three months to June from 4.5-million in The Organisation for Economic Co-operation and
the first quarter. The expanded definition of unemployment, Development said rapid economic growth in SA had to be
which includes people who have stopped looking for work accompanied by policies to boost job creation and training
was at 36.2% from 36.6%. opportunities. "The private sector is Africa‟s employer of
Historically, from 2000 until 2012, South Africa tomorrow," Mario Pezzini, director of its development
Unemployment Rate averaged 25.5 Percent reaching an all centre, said.
time high of 31.2 Percent in March of 2003 and a record low
of 21.9 Percent in December of 2008. The unemployment Source : Business Day, 2 August 2012
rate can be defined as the number of people actively looking
for a job as a percentage of the labour force Government
South Africa Unemployment Rate counts cost
of corruption
Endemic corruption and maladministration have resulted in
the government requiring the equivalent of five of its
annual housing budgets to fix shoddily built reconstruction
and development programme (RDP) houses.
Public Protector Thuli Madonsela has begun a nationwide
investigation into RDP houses and is collecting shocking
Source : Reuters 31 July 2012 testimony from poor people given state housing.
The government has set aside R50bn to repair houses
already built which could have provided subsidised
Nedbank criticises State over housing to more than 1-million households.
slow “20 - Year Pipeline” Human Settlements Minister Tokyo Sexwale said the
government was exploring measures to stop the
construction of substandard houses by private contractors.
In April Nedbank chairman Reuel Khoza was attacked by He told a meeting with the construction industry in Pretoria
African National Congress leaders when he said SA‟s that, among other measures, the government was
democracy was threatened by a "strange breed" of political considering starting its own company to build the houses.
leaders who appeared incapable of dealing with the "What we have been getting is less than credible, shoddy
demands of governance and leadership. Nedbank workmanship. When we have the huge projects we give
economist Nicky Weimar said the government lacked them to credible companies who bring in their expertise,"
capacity and a cohesive strategic plan for the economy. he said. "But when we build houses for our people, instead
"With government‟s planned R844bn investment in of bringing in those major, credible companies, we give it
infrastructure over the next few years there is the ability to to people who believe it‟s their right to get the contracts.
inject growth into the market, but the state‟s ability to spend
it has become a worry," Ms Weimar said .
Build Trends Page 4Why not let the major companies build some of the houses? Basil Read, another major player in diversified
It will force them to bring empowerment partners. construction, engineering and mining, expects headline
Mr Sexwale said the government could not be blamed. "I earnings per share to fall 75%-85% in the six months to
don‟t remember government building houses, but the service June, compared with the same period last year.
providers," . Murray & Roberts says it expects a diluted headline loss
Kerwin Lebone, a researcher at the South African Institute of per share for the year ended June to be between 235c and
Race Relations, said the state‟s housing subsidy last year 255c, which represents an improvement of 44%-48% over
was R55,000 for a single-stand RDP house. "R50bn will last year. However, considering it made a loss attributable
provide subsidised housing to just over 1-million households to equity holders of R1.7bn last year, the firm remains
and thus halve the housing backlog of 2.3-million. It is a mired in red ink.
crying shame that this amount has to be used to fix shoddy Many of the industry's woes stem from the generally poor
workmanship. “Mr Lebone said research had shown that macroeconomic environment. But along with this, SA
40,000 government officials were investigated for subsidy suffers from a mutual lack of trust between business and
fraud by the auditor-general, 1,910 were arrested, 1,296 the government, predicated on issues ranging from
were convicted, and R44m was recovered. "The government corruption, poor service delivery, and allegations of private
knows the people who are best qualified to deliver quality. sector bid-rigging
They know who delivered quality stadiums under tight Marie Ashpole, who is spokeswoman for industry body, the
deadlines for the 2010 Soccer World Cup. The appointment South African Institution of Civil Engineering, says it has
of construction companies with a proven track record is the followed with dismay auditor-general Terence
way to go," he said. Nombembe's claim of Rll bn in unauthorised and irregular
Stevens Mokgalapa, Democratic Alliance spokesman on expenditure by municipalities in the past financial year.
human settlements, said the R50bn allocated to fix RDP This affects the building of infrastructure. Ms Ashpole cites
houses was "fruitless and wasteful" expenditure. "The reports of farmers in the Lichtenburg district in North West
government should not be spending all this on rectification who cannot get their crops to market, as roads in the area
almost R930m is going to be spent this financial year alone, have become "appalling". "Some of the 'tarred' roads were
which means the government is building backwards, not so bad that, in order to be able to travel on them, they had
forward," he said. to be covered with sand“. Ms Ashpole says.
North West residents yesterday appealed to Ms Madonsela billions have been spent on tenders given to contractors...
to resolve their problems with RDP houses. They packed the or incompetent cronies that could not 'fix' the roads.“
Klerksdorp town hall and told how they had been forced to The government is trumpeting its proposed multi-trillion
sign up and occupy houses even when they complained rand infrastructure plan. But the continuing slew of poor
about the poor standards of construction. results from infrastructure firms indicates SA is a long way
A contractor told me that someone else would sign my from its prerecession growth path.
“happy letter” if I kept refusing to sign. My house is now Director and chief economist of consultancy Econometrix,
falling apart," said Margaret Nteu of Kanana township. Azar Jammine, says SA needs to "implement" its policies,
Foundations were constructed and abandoned three years while fostering greater co-operation between the state and
ago in Joubertina township, Buti Tshabalala told the hearing. private sector. "There is so much rhetoric that is doing
damage to the economy of this country.“
The Manufacturing Circle 2012 second-quarter survey
Source : Business Day, 3 August 2012 released this week shows that manufacturing confidence is
fragile in the country.
Many of SA's construction and engineering groups have
Delays in government's manufacturing divisions that service the development of
infrastructure. The report says that rising costs of
infrastructure plans are hurting electricity, fuel and labour, a scarcity of raw materials, and
muted domestic demand will hit manufacturing in future.
the construction sector Added to this is the poor performance of SA's mining
sector.
Questions remain over policy making. SA's ferrochrome,
A slew of large construction and engineering companies platinum and steel industries are reeling, aluminium
released trading updates. But despite recent reports that see smelting is threatened, and zinc production in SA has
some light at the end of the tunnel for infrastructure markets, closed down as a result of soaring energy prices.
expectations are poor. Basil Read says earnings for the year have been
Aveng, SA's biggest diversified construction and negatively affected by difficult trading conditions in the
engineer-ing group, expects lower head-line earnings per sector. Multimillion rand losses have come from contract
share for the year to June, falling between 50% and 60% disputes. These include roads contracts in the Free State,
from last year. It says the depressed South African which last month sounded the death knell for listed
construction sector and delays in the state's infrastructure construction and engineering company Sanyati Holdings.
plans are hurting, even as other operations reflected steady
or improved financial performances in the period. Source : Business Day, 17 August 2012
Build Trends Page 5Energy Generation
Concrete and Power utility Eskom has submitted a licence application to
construction industry the National Energy Regulator of South Africa (Nersa) for
its proposed 100 MW Sere wind farm project, to be
launch their own developed near Vredendal, in the Western Cape, for
TV channel around R3-billion.
Wind Power
The concrete and construction industry has launched its first
dedicated Web TV channel, Concrete.TV, which will not only
provide a video platform for regional and global coverage in Should Eskom receive the 20-year sanction being sought,
the professional and do-it-yourself market, but also enable the first unit could be operational by October 2013, with the
easy access to specialised video content. final unit being installed by May 2014.
Concrete.TV producer Fiona Summers says the channel aims The project, which is backed partly by a portion of a $3.75-
to become the „go to‟ resource for the concrete and cement billion World Bank loan extended in 2010, would involve
industry, helping to solve industry-specific challenges, turbines with capacities of between 1.5 MW and 3 MW
highlight its successes and react to industry news. each.
“Traditional communication channels are losing their efficacy The development will also receive funding from the Clean
and, in a connected world, there is an inevitable trend Technology Fund, the African Development Bank and
towards next generation, on demand multi-media content Agence Française de Développement, with the balance
delivery,” she explains. being derived from internal revenue sources.
The channel is supported by several key organisations, The utility has requested that its licence become effective
including the Concrete Society of Southern Africa, the from October 2012 and says it does not envisage seeking
Cement and Concrete Institute, the South African Ready-mix an expansion, owing to the fact that a site wind-resource
Association and the Aggregate and Sand Producers assessment indicates the potential for such an expansion
Association of South Africa. to be negligible.
The channel, launched on August 8, is aimed at contractors, Eskom modelling anticipates that the project will be able to
architects and associations, as well as suppliers of ready-mix produce 225 000 MWh a year from 2014, of which 202 500
concrete, cement and materials, and aims to cover all MWh will be fed into the grid, with the balance used
aspects of the concrete and construction industry. internally.
Features on the site will include a monthly roundup of news, The project, which is located near Koekenaap, on South
projects and products as well as interviews with industry Africa‟s West Coast, will be connected to the grid through
leaders and thorough coverage of key industry events. the Skaapvlei substation at a voltage of 132 kV and into
It will also offer an option for vendors to host their own the existing Juno-Koekenaap distribution line.
Vendor Channel to showcase company products and The project should create 11 permanent jobs and Eskom
projects. will seek to maximise local content during construction,
even though such targets will not form part of the
Source : Engineering News, 24 August 2012 evaluation criteria.
The utility indicates in its application that it will enter an
operations and maintenance contract with the supplier of
the turbines for a period of five years from operational
Brikor to sell non- acceptance. However, a detailed plant life-cycle plan
would be developed once the equipment suppliers had
core operation been selected.
Building and construction materials manufacturer Brikor said Source : Engineering News , 20 August 2012
it would sell its Bronkhorstspruit properties and operations to
businessperson Marius van Wyk for R10-million, to regain
focus on its core operations and to strengthen its financial
Nuclear Power
position.
The JSE-listed company, which is pursuing a restructuring
programme to restore operations to profitability, said in a State-owned Eskom is embarking on a multibillion-rand
statement that the sale was in line with its strategy to dispose project to replace six steam generators at the Koeberg
of noncore operations to strengthen its cash resources and nuclear power station, in the Western Cape, during 2016
improve its debt burden. and 2017.
The proceeds from the disposal will be utilised to reduce As part of its ongoing maintenance and refurbishment
debt‚” Brikor stated. plans, the power utility issued a tender to identify suppliers
able to design, manufacture and install three steam
Source : Engineering News, 24 August 2012 generators in each of Koeberg‟s two units.
Build Trends Page 6The supplier would also be required to undertake any safety cleared with minimum delays,” he indicated. Ndebele
analyses and studies required to replace the generators. added that Sanral had also been in talks with the road
The installation of the generators would be undertaken during construction industry to directly import bitumen from
scheduled refuelling, inspection and maintenance outages of abroad. “The success of this initiative will determine the
the two units at Koeberg. future direction to be adopted with regard to direct
The dates of the anticipated outages were dependent on the importation of bitumen by the road construction industry,”
requirements of Koeberg and the electricity supply system, as the Minister said.
well as the commercial negotiations with chosen suppliers, Meanwhile, Martins said although delays or shortages in
the utility added. bitumen supply had been identified, his department was
Eskom noted that the current steam generators in Unit 1 and not aware of instances where it impacted on the retention
2 have been in operation since 1983/84 and 1984/85, of jobs, or the creation thereof.
respectively. “The primary reason for the shortages is due to oil
The utility said that the new generators would incorporate companies experiencing unplanned shut downs at the
modern design features that would allow ease of refineries or not having sufficient storage capacity to
maintenance and inspections and improve heat-transfer maintain minimum bitumen reserves during shutdowns,”
efficiency, leading to the overall efficiency of the Koeberg the Minister pointed out.
power station. Eskom said the outcome of a “commercial Also contributing to the shortage was the fact that oil
process”, currently being undertaken, would determine the companies planned their maintenance shutdowns during
total cost for the project. the peak bitumen consumption periods, which rendered
Further, in efforts to facilitate localisation and skills transfer, them unable to supply sufficient quantities of South African
as well as allow understanding of the scope of the Bureau of Standards-specified grade bitumen.
replacement project, Eskom aimed to host a workshop during Martins said it was also established that bitumen
the tender process, facilitating the interaction of local consumers, such as asphalting-producing companies, did
companies interested in entering the nuclear sector and not always collect their orders on time from the refineries.
potential Eskom suppliers that meet the project criteria.
South Africa plans to increase its nuclear capacity and has Source : Engineering News, 10 August 2012
said that localization will be a key part of any contracts to be
awarded.
Source : Engineering News, 30 July 2012
SA begins to embrace new
building techniques
Bitumen shortage
A concerted strategy by the local banking sector and
is hampering road government to increase the financing of structures built
using alternative building technologies (ABTs) in South
projects Africa is not only driving the increased application of these
techniques, but is also targeting sceptical end-user
The bitumen supply shortage is straining road maintenance in perceptions.
South Africa, and could lead to smaller projects, such as South African consumers have long preferred the brick-
pothole repairs, being deferred to focus on major and-mortar construction approach and have been slow to
infrastructure projects, Transport Minister Ben Martins said react to ABTs, which have entered the market at an
this week. increasing rate over the past decade.
The Gauteng Freeway Improvement Project, as well as the Overhauled banking policies and a renewed push by
N1 and N2 toll road projects could also be affected by the government are aiming to shift this perception, which
shortage of bitumen, which is used to produce asphalt for stakeholders hope will enable the practice to gain
road construction. momentum and develop into a standalone industry.
Responding to a question by Congress of the People Eastern Several bankers have developed a model policy for the
Cape Member of Parliament Zola Mlenzana, Martins stated financing of properties constructed using alternative
that although there were no measures in place to alleviate the building systems, with local bank Absa appearing to lead
local shortage, the department had been engaging with the the private-sector charge by focusing on the development
relevant stakeholders to find a sustainable solution. of sustainable integrated projects in line with government‟s
“Various members of the Southern African Bitumen housing policy.
Association formed a consortium for importing bitumen and Absa, in association with parastatal the National Home
the Department of Transport provided support by Builders Registration Council (NHBRC) and the National
recommending the relaxation of import duties on bitumen, Housing Finance Corporation, launched the first housing
while the South African National Roads Agency Limited innovation competition in 2005 in Shoshanguve, Tshwane,
(Sanral) is providing support with the logistics planning to draw innovative housing designs to the affordable
requirements to ensure that bitumen received at the ports is market.
Build Trends Page 7Absa head of retail markets Arrie Rautenbach explains that The human settlements market was not exclusively
the Eric Molobi Housing Innovation Hub has provided a focused on providing houses and homes, but also satisfied
space in which private companies can permanently a job creation function. “From an alternative technologies
showcase building technologies and where the durability of perspective, when you are working in the human
these techniques can be tested. settlements market, you have to manage the issue of job
“The aim of this hub was to set a creation. While new technologies must be sustainable, so
Permanent benchmark of good quality and too must the skills transfer, making labourers employable
Showcase cooperation between a set of in a wider market,” she said. De Lange also stresses that
stakeholders and role-players, as the correct implementation of building technology is
well as to show that low-cost housing construction can be imperative to avoid the negative impact of time constraints
fast-tracked with cooperation and innovative technology,” he on quality. “In the construction industry, everything is about
explains. quality – whether the product is factory-manufactured,
In addition to the 17 low-cost alternative- technology houses precast or cast on site. The focus needs to be on the end
built at the hub, this private-public partnership also hosts an product and how well it will last over time,” she says
on-site laboratory at which various alternative housing While government asserts it is not in a position to support
materials are tested and research into alternative specific alternative materials or technologies, it has
technologies is conducted. ensured that all housing projects have facilitated the
The laboratory reviews rational designs of ABTs that do not application of alternative technologies and that, in such
comply with deemed-to- satisfy rules as stipulated by the cases, tender processes are specifically designed to allow
South African National Standard (SANS) 10400, and tests for alternatives. “That said, we will only support housing
the materials used at building sites. technologies and systems that can be sustained in the
NHBRC engineer Paimaan Byron emphasises that the costs South African context,” NDHS chief director of
of such tests undertaken by the NHBRC are borne by the communications Xolani Xundu stresses.
construction company, should such testing indicate A review by the NDHS research directorate in 2010
noncompliance. “Should the material comply with SANS reported that, while the policy space does not prohibit the
10400, the account is for the NHBRC,” he says. use of ABTs in government housing projects, most ABTs
Interestingly, Byron points out that a common misconception have limited production capacity as a result of beneficiary
in the industry is that alternative technologies always include perceptions and institutional or developmental issues.
novel or engineered materials that have not previously been Results revealed that housing beneficiaries tended to feel
used in construction. In reality, it is simply the way in which devalued by the State, and felt that they had been
the materials are engineered into a design that brands them provided with an inferior product when ABT methods were
as innovative. “Innovative housing techniques refer to any used.
deviation from traditional construction methods that are not Of the 2.9-million housing units delivered for low-income
specified within the limitations of SANS 10400 – it does not earners between 1994 and 2010, only 17 000 were
necessarily have to be a material that has never been used constructed using innovative systems.
before,” he notes. “The major impediment to large-scale roll-out is the
The importance of the hub, Byron adds, is that it is the first inability of alternative technology providers to build at
time in South Africa that these engineering methods have scale, a lack of understanding regarding the necessary
been tested over the long term to determine their resilience certification and end-user perception,” asserts Xundu.
to the harsh African climate. He adds that the industry should be willing to operate
Following seven years of exposure to the elements, a within government constraints in the low-cost housing
number of these ABT houses have experienced significant environment, be transparent about product strengths as
and often irreparable damage, while others have well as weaknesses, and ensure the availability of system
demonstrated a robust construction technique and remained information to foster positive user perception.
in good condition. “We will embark on a consumer education drive to dispel
While building innovations have proved attractive to the negative perceptions and we expect innovators to do the
general housing market as a result of a trend towards a same,” he says.
more sustainable, energy efficient way of living, it is its
potential for wide-scale application in the low-cost or Source : Engineering News, 27 July 2012
subsidised housing sector that is the driving force behind
government and banking sector investment.
Despite the ability of alternative
Other construction methods to
accelerate the delivery of
Imperatives housing, Cement & Concrete
Institute human settlements technical marketing consultant
Adele de Lange warns that the social agenda of the country,
specifically with regard to job creation and poverty
alleviation, must not be discarded during this process.
Build Trends Page 826% Black Ownership of Sephaku Cement PPC South Africa saves 25% Pretoria Portland Cement Company Limited (PPC) is pleased Five-hundred employees of Chinese company Sinoma to announce a second phase broad-based black economic International Engineering are currently working on site to empowerment transaction which entails the placing of an construct cement producer Sephaku Cement‟s new additional 39.3m ordinary shares or 6.5% of PPC's increased Aganang cement production facility, near Lichtenburg, in share capital under black ownership. Following the first phase the North West, with 200 more to arrive within the next few BBBEE transaction for 15.3% during 2008, this will increase weeks. The Aganang operations will include limestone the direct black ownership of the PPC Group to 20.8%. mining and the chemical processing of raw materials to Taking into account the 80:20 revenue split between the produce clinker. Groups South African and international businesses the Sephaku did initially go out to tender for South African transaction will result in an effective 26% black ownership of contractors, but realised that no South African contractor PPC's South African operations and enable the company to would be willing to take a turnkey risk on such a plant, meet the South African mining rights conversion requirements Sephaku Cement CEO Pieter Fourie said. “The fixed as set out by the Department of Mineral Resources in terms prices we received from the Chinese Sinoma saved us of the Mining Charter. 25% on total development,” he says. Of the additional shares being issued the major portion or However, skills transfer and the use of local labour are 68% shares will be issued to the employees of PPC's South provided for in the contract with Sinoma. One South African businesses. 27% of shares will be issued to PPC's African labourer is used for every three Chinese workers. existing strategic black partners and 5% to a newly created “I must reiterate that the Chinese workers will only be here trust that will focus on Black women groups in areas where during the construction of the plant; therefore, permanent the company operates. The transaction value of jobs for South Africans will be created during the entire life approximately R1.1bn is estimated based on the 30 day of the plant, which is expected to be between 30 and 40 volume weighted average price of PPC shares. years,” he adds. Meanwhile, the skills transfer between the Paul Stuiver, CEO of PPC, said: This transaction was Chinese and the South African workers is progressing well, structured for the benefit of those parties closest to our especially with regard to the work ethic. business. We were particularly keen for our 2400 South The Chinese building style does differ from the South African employees to participate at a significant level and this African style in some practical ways, says Fourie. “The transaction will result in them owning approximately 7% of the concrete and steel are the same but concrete pumps and PPC group. An employee trust has been established to hold cranes are used more extensively for placing concrete. the employee shares. All permanent employees of PPC in Other practical examples include their wheelbarrows that South Africa will participate. A portion of shares has been set are properly balanced, the ways in which they rapidly fix aside for new employees joining the company during the next the steel, using tailor-made tools rather than pliers and three years. doing all steel fixing preparation work at a one-metre level The SBPs are the same as those which participated in the above ground. These are minor differences that result in first phase BBBEE transaction during 2008 being Peu, significant productivity improvements,” he explains. Nozala, Portland Consortium and Palama Cement Language did prove to be a challenge, but both companies Consortium (formerly Capital Edge) who have contributed to have appointed translators to deal with this. “We also the company on a number of fronts during the past four experienced some challenges relating to safety years. PPC has established the Bafati Investment Trust for management, as our safety culture is very different to the purpose of holding shares for black women groups in the theirs. We have, however, worked together on this and are vicinity of its operations. The board of trustees for this trust proud to have more than one-million lost-time injury-free will comprise a majority of women. Paul Stuiver commented: hours on this site,” Fourie points out. This transaction demonstrates our on-going commitment to Sephaku started construction on the R2.3-billion, 2.5- transformation and broad-based empowerment in the spirit of million-ton-a-year cement production facility late last year, the Mining Charter. Additionally it will further enhance our with first production scheduled for September 2013, after BBBEE credentials. the commissioning of the plant‟s clinker in August 2013. The transaction will also allow PPC to streamline its corporate “We decided on this project because the average cement structure by creating separate South African and international plant in South Africa is about 38 years old and we believe operating entities, thereby aligning the company's structure it is time to add capacity in preparation for the country‟s with its strategy to expand its footprint on the African future growth,” says Fourie. continent. At the same time the holding company, Pretoria Portland Cement Company Limited will be renamed to PPC Source : Engineering News, 10 August 2012 Limited. Paul Stuiver concluded. Source : Engineering News, July 2012 Build Trends Page 9
Ndlovu was unable to provide information on how much
Imported Cement saga continues cement had been imported into South Africa to date this
year, stating this information was kept by the SA Revenue
Service and Statistics SA.
Recently there has been coverage in the media about the Bryan Perrie, the managing director of the Cement and
increase in imported cement, the quality thereof and the Concrete Institute (C&CI), questioned how the NRCS
impact of these imports on the local industry. could ensure that all the required conformity tests were
being done, when it did not know how much cement was
From AfriSam‟s perspective, we
AfriSam‟s recognise that competition in
being imported.
“Some producers have got samples and tested them and
the cement industry is
perspective inevitable and we welcome
some of them were found to be sub-standard. We‟re not
saying all of them are sub-standard,” he said
healthy competition. It is a clear indication that the
competitive landscape is changing and confirms our belief
that we cannot continue to conduct our business like we
have done in the past.
AfriSam welcomes the announcement made by the National
Regulator for Compulsory Specifications (NRCS) where it
committed to promoting fair competition in the South African
cement industry while at the same time protecting
consumers against unethical and exploitative trade
practices.
AfriSam supports the Regulator‟s decision to step up control
over the industry, as it is in the best interest of both
suppliers and consumers that all cement sold in South
Africa complies with the regulations set by the NRCS.
NRCS‟s The National Regulator for
Compulsory Specifications Data from Stats SA
response (NRCS) confirmed that some
50kg bags of cement in a Source : Engineering News, 7 August 2012
consignment of cement imported from Pakistan were
underweight, but stressed it had not found any inferior
quality cement on the local market.
Thomas Madzivhe, the NRCS‟s acting chief executive, said
yesterday that complaints of non-compliance received about
Lucky Cement imported from Pakistan had been fully
investigated and the NRCS was satisfied the certification
bodies had done all the necessary checks and tests and
that the cement complied with South Africa‟s regulations.
Madzivhe said the NRCS suspected market access and
competitive and market share issues might be a reason for
the complaints.
Musa Ndlovu, the NRCS‟s acting executive for non-
perishable products, said a directive had immediately been
issued against Lucky Cement when complaints of non-
compliance were received at the end of 2010, which meant
this cement could not be sold in South Africa.
Ndlovu said the NRCS had done a full 28-day test on the
cement, but the results did not provide it with any tangible
evidence to prove the product was non-compliant in terms of
quality. It had only found evidence once of non-compliance
but this was based on “short measure” and not quality, he
said.
He added that the NRCS did regular sample testing of
cement to check its conformity with the compulsory standard
but was not required to do sample testing for every 500 tons
of cement imported into the country.
Build Trends Page 10Build with Confidence
AfriSam (South Africa) (Pty) Ltd
Reg No: 2006/005910/07
PO Box 6367
Weltevredenpark 1715
South Africa
Tel: (011) 670 5721
e-mail: nadeen.gordon@za.afrisam.com
www.afrisam.com
Tel: 0860 141 141
e-mail: customer.service@za.afrisam.com
Main sources of information:
Industry Insight
Tel: (021) 554 0886 / 0688
www.industryinsight.co.za
Econometrix
Tel: (011) 483 1421
www.econometrix.co.za
Cement and Concrete Institute
Tel: (011) 315 0300
www.cni.org.za
Disclaimer:
AfriSam, its shareholders, employees and agents
accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage
of any kind or nature, whatsoever arising, from the use
of or reliance on information provided in this publication
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