SOUTHERN Africa’s largest cement maker Pretoria Portland Cement (PPC)’s Zimbabwean operation could “grind down” if the country’s indigenisation law is implemented, CEO Paul Stuiver said this week.
Should Zimbabwe’s indigenisation law — the subject of a consultative process — be implemented, Stuiver says, the company’s Zimbabwe operations would probably “grind down over time”.
He said the dollarisation of the Zimbabwean economy after years of economic decline characterised by high inflation, resulted in a “massive increase” in cement demand.
PPC produced 5 000t of cement in January 2009, but ended the year between 30 000t and 40 000t in output.
“Then, in March this year, we saw a 10% drop off in demand. The announcement dented our business,” said Stuiver. “There is concern on our side that this law is not a business-friendly bill. There exists huge uncertainty at the moment. We hope to see some sense prevail.”
The controversial law, if implemented in its current form, would see foreign firms cede 51% of their shares to locals.
The indigenisation law came into effect on March 1, and would have affected foreign-owned firms valued at US$500 000 or more.
Under the economic empowerment regulations, foreign businesses valued at US$500 000 and above must “cede” 51% stakes to “indigenous” Zimbabweans.
However, the policy’s implementation was suspended in April, after calls for widespread consultation as Prime Minister Morgan Tsvangirai and President Robert Mugabe differed on its content.
Stuiver said PPC would work with any new commercial partner in Zimbabwe, but noted that any new 51% shareholder would need to come up with the equivalent percentage of capital for any investment requirements.
“Cement pricing is expected to remain under pressure for the remainder of the year,” the company said in a statement.
Demand for cement would probably decline this year, the company said.
Overall, cement volumes in the six months to March 31 fell 8% even as sales in Zimbabwe more than trebled, PPC said.
South African deliveries slipped 15% because of weak homebuilding and the slow release of government infrastructure projects, the South African company said.
PPC said it would slow down on some of its planned capital spending because of lower demand but will continue to seek expansion beyond South Africa, Zimbabwe and Botswana.
“The strategy to expand the business beyond its existing geographical boundaries will continue to receive significant management attention,” PPC said.
Net income rose to R551 million (US$73 million), or 114,6 cents a share, in the six-month period. This was an improvement on the R103 million or 20,6 cents a share achieved a year earlier, the company said.