THE country’s largest cement producer, PPC Zimbabwe, says urgent measures are needed to safeguard the viability of the local cement industry against the crippling impact of imported cement.
Despite having adequate capacity to supply the local market, Zimbabwe remains a destination for cheap and substandard cement products, which are finding their way through the country’s borders as well as via smuggling, PPC Zimbabwe managing director, Mr Kelibone Masiyane, said in an interview.
The cement industry constitutes five players, namely PPC Zimbabwe, Lafarge Zimbabwe, Sino Zimbabwe, Livetouch and Pacstar Cement with a combined installed capacity of 2,6 million tonnes per year compared to a current annual demand of 1,4 million tonnes per year.
According to Mr Masiyane, the local cement industry’s competitiveness when compared to regional players is both at a disadvantage and vulnerable.
He went further to explain that the issue and impact of imports is two-fold: there is the threat imports pose on sustainable operation of local cement industry and there is the hazard of using substandard cement products.
The Zimbabwe cement industry is a significant contributor to economic growth, employment creation and trade. Without this industry, cement would have to be imported in large quantities, thereby increasing demand for the scarce foreign currency.
Given the significant role that the industry plays, all regional countries, have adopted tariff measures to protect their cement industries from imports, with the exception of Zimbabwe.
The country attracts imported cement due to the high selling price in the market and excess capacity in the region.
Zimbabwe and its six neighbouring countries have a total production capacity of 39,8 million tonnes per year compared to total demand of 23,5 million tonnes per year. South Africa, Mozambique and Zambia suffer from huge excess capacity.
This poses a serious threat to the local market as regional players find it lucrative to export into Zimbabwe using a variable cost pricing model.
PPC Zimbabwe alone used to export over 100 000 tons of cement into the region annually around 2012, but all this has reduced to insignificant volumes due to the high cost of production in Zimbabwe coupled with deterioration of regional currencies against the US dollar, rendering the country uncompetitive within the region.
The cement industry is a capital intensive and high energy consumption sector, which is vital for sustaining and growing local infrastructure.
Because of the huge capital investment required to set up a cement manufacturing facility, capacity utilisation becomes one of the most important aspects that impact on profitability and sustainability and shareholders expect a return on their investments.
When capacity utilisation is very low due to suppressed demand, as is the case in Zimbabwe, the cement industry viability is threatened.
The industry is, therefore, requesting for “protection” from imported cement until such a time that the playing field is even with cost drivers in local production have been revised to competitive levels.
Mr Masiyane went on to confirm that the local cement industry has made submissions to the Ministry of Industry and Commerce.
“The local cement industry has met the Minister of Industry and Commerce (Dr Sekai Nzenza) and we are confident of a positive response”, said Mr Masiyane.
He said survival of the industry is even more critical given the impact of Covid-19 in an already fragile economy.
Another point of concern relates to substandard imported cement products in the market.