2012 News

 

Cement producer Sephaku Cement has put out a tender for a logistics provider for its projects, which are expected to start producing in December next year, with transport tenders comprising between 300 and 400 trucks expected to be awarded in March, CEO Pieter Fourie tells Mining Weekly.

Sephaku Cement’s projects include the 1.2-million-ton-a-year Aganang cement production facility near Lichtenburg, in the North West, and a 1.4-million-ton-a-year grinding facility in Delmas.

“We are confident that we will complete the projects within budget and it is important to note that the budget of R3.2-billion is still the same one we went to the market with in 2008, the only difference being that we managed to build a 6 000 t/d plant instead of a 5 000 t/d plant as had originally been planned,” he says.

In 2013, Sephaku Cement will focus on the installation of large pieces of equipment, operational preparedness and commissioning, Fourie says.

“Commissioning will start in June next year. It will be a sequential process with different production phases having to be commissioned,” he states.

Commissioning is expected to be completed by November next year; however, after production has started there will be another three-month test period during which the guaranteed outputs, such as fuel consumption, emissions and coal consumption, will be evaluated, Fourie explains.

Ensuring operational prepared- ness includes the recruitment and training of new staff and about 200 skilled workers will be appointed in the second half of 2013. Further, Sephaku Cement will enter the cement market in the second half of 2013. “While we will only start to produce cement at the end of next year, we will start interfacing with customers in the second half of the year,” he says.

Meanwhile, Fourie states that Sephaku Cement is positive about the market as 2012 has been the first growth year in cement demand since 2007. There is also an improvement in residential activity, which is the main driver of cement demand and, therefore, the company is confident that, when it begins production, the market will be on an upward trend.

Sephaku Cement’s short- to medium-term target is to become the most efficient and lowest-cost producer of cement in South Africa, while its long-term target must be viewed in the context of the growth strategy of its majority shareholder, African cement producer Dangote Cement, Fourie says.

“Dangote Cement has ambitious targets to expand into 13 African countries and Sephaku Cement will certainly be a part of that growth strategy,” he explains. Sephaku Cement plans to have a second cement plant operational within the next five years. The company announced in April 2011 the establishment of a 3 000 t/d clinker and cement production facility near Dwaalboom, in Limpopo. Construction on this plant is expected to start once the Aganang facility moves into production.

HIGHLIGHTS FOR 2012

According to Fourie, Sephaku Cement’s biggest highlight for the year was finalising the R1.95-billion debt funding for its projects. South African banks Standard Bank and Nedbank jointly funded the debt requirements of Sephaku Cement in a ten-year deal. “This deal was the last step in securing a fully funded project – it brings closure to a five-year-long fundraising effort and elimi- nates any doubt there could still be about our entrance into the market,” he says.

The fact that two of the largest banks in South Africa are willing to support the project financially indicates its robust viability and brings confidence on a broader industrial basis that private- sector investment is moving forward again, he adds.

Meanwhile, the support for these projects reflects confidence in the infrastructure development programme of South Africa and indicates that the country is ready to move into its next growth phase, Fourie says.

Another highlight is Sephaku Cement’s substantial progress in the construction of its projects.

“In 2012, we completed excavations of about 400 000 m3 for foundations, of which 50% was blasted, and we poured 70 000 m3 of concrete on the two sites.”

Sephaku Cement’s third highlight for the year was the arrival of the kiln at the Aganang site in October.

Written by: Leandi Kolver Edited by: Martin Zhuwakinyu 14th December 2012
The cement industry will have greater competition from the end of next year when new entrant Sephaku starts production, CEO Pieter Fourie said last week.

Sephaku is working with Sinoma, a Chinese company with cement plant building experience. The company will be the first new entrant to the local cement production market since 1934.

Sephaku is also building a cement mill near Delmas, in Mpumalanga. "We look like we will produce 2.5-million tons a year from the end of next year," Mr Fourie said.

Sephaku is largely funded by Nigerian partner Dangote Cement, which has pumped in money for new technology.

"Our plant will be more advanced than the old plants, some of them up to 50 years old, that other cement makers have in South Africa," Mr Fourie said.

Sephaku has contracted 800 Chinese experts and employed 400 South African workers to build the plant. It has been criticised for not using more locals. "The use of Chinese staff is due to their skills," Mr Fourie said. "Sinoma has built more than 200 cement plants globally. There are only three global suppliers of cement plants: one German, one Danish and Sinoma.

"When we initially negotiated the contract, we asked South African contractors to quote as well, in partnership with European suppliers."

Mr Fourie said South African contractors were unable to quote a fixed price for the building contract.

Sinoma, on the other hand, committed to a fixed price.

Further, an audit showed that skills needed for the project were not available locally.

Alistair Anderson: andersona@bdfm.co.za Published on BusinessDay December 10 2012
R1.95BN IN LOCAL FINANCING FOR SEPHAKU CEMENT, SOUTH AFRICA’S FIRST HOMEGROWN CEMENT MARKET ENTRANT IN OVER 70 YEARS AFFIRMS BELIEF IN ITS SUSTAINABILITY; EMPHASISES THE DEVELOPMENTAL ROLE OF ITS INDUSTRY; AND DEMONSTRATES CONFIDENCE IN THE VALUE OF SA AS A BUSINESS DESTINATION.

Major South African banks, Standard Bank and Nedbank have jointly funded the debt requirements of Sephaku Cement in a ten year deal valued at R1.95bn. Sephaku Cement were advised on this transaction by Sasfin Capital. Signed today in Johannesburg, the financing agreement marks a critical juncture for the company in its go-to-market preparations and signals a strong vote of confidence from the local market.

The closure of the debt and commencement of the drawdown of its loans is a major milestone for the Dangote Cement subsidiary and associate of JSE-listed Sephaku Holdings. The agreement effectively closes the gap in terms of the required capital for Sephaku Cement to be fully prepared for market entry and a significant competitor in wholesale and retail cement trade.

The significance of this deal, says Sephaku Cement CEO Pieter Fourie “goes beyond cement. It indicates a strong, new commitment to industrial development in South Africa. Through new infrastructure establishment in Mpumalanga and the North West Province and the resulting local job creation, the investment benefit will extend to provincial and community development.”

In addressing infrastructure deficits and meeting unmet needs for the likes of housing, the cement industry is a building block of socio-economic development. This is emphasised by Sola David-Borha, CEO of Stanbic IBTC in Nigeria who says that “as a result of the transaction, we will see Sephaku become a leading cement producer in the region, enabling significant job creation with wider economic benefits.”

Of the total capital raised by Sephaku Cement, just over 50% of total procurement spend will be invested locally. In addition, the combined plants will create direct employment opportunity for around 400 local people and up to 3,000 jobs indirectly.

Greg Webber, Head of Mining Finance, South Africa at Nedbank Capital says: “We are proud of the role we have played in financing the development and construction of efficient new cement capacity by Sephaku Cement and of our association with the largest investment by an African company into South Africa. This signifies a strong endorsement of South Africa’s economy and more particularly the need to meet our growing housing and infrastructure requirements.”

David-Borha adds “the Standard Bank team in Lagos and Johannesburg is delighted to have been able to help put together and invest in this landmark deal, which sees the leading Nigerian firm Dangote making the largest ever foreign direct investment by an African company into South Africa. “This transaction goes to the heart of Standard Bank’s core strategy of encouraging investment in infrastructure development in our home market, Africa,” she says.

Sephaku Cement is focused on the goal which Chairman, Aliko Dangote describes as being to create modern cement plants in strategic locations in Africa. “It is all systems go for us. Our success is being backed 100% by our 100% African partners. We hold ourselves accountable to live up to the confidence placed in us by them,” concludes Fourie.

Local cement production entrant Sephaku Cement is living up to self mandated contractual requirements to ensure R1.7bn in local investment through construction of the first new clinker and cement plant in South Africa. On completion of the operating plants, being built in partnership with the world’s largest supplier of cement plant equipment (“Sinoma”), Sephaku will employ a local only workforce.

“We are committed to providing the South African workforce with sustainable job creation and business growth opportunities. Once we are producing cement, 400 permanent positions will be filled at our plants. Through the supply chain, we will prescribe local only preferred suppliers to unlock significant growth for South African businesses,” says Pieter Fourie, CEO of Sephaku Cement.

Supply of local materials includes aggregates, cement and reinforcing steel. Fourie notes that Sinoma, whose contract ends once the plant is operational in 2013, have employed local expertise including geotechnical studies, blasting work on site, site levelling and bulk earth works, piling and security management. Sephaku Cement’s commitment to the local market is reinforced through the building of the Sephaku Ash plant solely by local contractors.

During the cement plant construction phase, he explains that Sinoma is required to make use of a percentage of local workers and local subcontractors. On completion of the plant, the Sinoma workforce will return to China with a few employees remaining for three months of performance testing, after which they will return home.

Since beginning its go-to-market preparations, Sephaku Cement has also invested in the local talent pool through a Bursary Programme, with six South African students having been awarded full time bursaries for engineering studies. Through its Apprentice/Artisan Training Programme, learners from local communities are currently undergoing training to become artisans (fitters and electricians).

Fourie concludes: “In making every decision, we ask ourselves whether the long-term outcome is going to be positive for the country. We have an opportunity here to establish a business that puts us in a position to contribute sustainably to the socio-economic growth in the areas in which we will operate. We do not take this responsibility lightly and aim to establish a business that will contribute to making South Africa more globally competitive.”
SEPHAKU HOLDINGS SAYS THERE WILL BE A SHORTFALL IN CAPACITY IN THE INDUSTRY IN FIVE YEARS BECAUSE OF A LACK OF INVESTMENT WITH FEW QUALITY LIMESTONE DEPOSITS IN SA

RAW materials supplier Sephaku Holdings said yesterday it would start producing cement from late next year.

Funds from its Nigerian partner, Dangote Cement, would enable it to benefit from new technology and plant, while competitors had to replace older facilities. The company said it would embark on a road show this week to attract investors in a growth strategy.

Sephaku would be the first new entrant to the local cement production market to open its own new plant since 1934, the company said.

"Further to the company’s strategy of becoming a focused cement player in the South African market, Sephaku Holdings has been streamlining its business and has made significant progress on its 2,5-million tons-per-annum cement producing facilities near Delmas and Lichtenburg," the company said.

Sephaku would benefit from new investment in a depressed market. SA construction companies have taken a severe hit following the collapse of global markets and a slump in domestic demand after the 2010 Soccer World Cup.

Sephaku CEO Lelau Mohuba said the company wanted to challenge large local producers Lafarge, PPC and AfriSam , regardless of threats from imports.

Some buyers say imported cement is cheaper and of acceptable quality. But French company Lafarge’s South African arm said last week it was concerned some imports did not meet quality standards or were imported without a licence.

Sephaku said it had a cash-flush investor in Dangote Cement, which owned 64% of Sephaku Cement. Dangote Cement had projects and operations in Nigeria, Benin and Ghana, with production and import capacity of 14-million tons a year and projects in development which offered 11,1-million tons a year in additional capacity.

Sephaku raised R350m by issuing equity to Dangote Cement in 2008. Sephaku raised a further R779m from Dangote in 2009 when it listed on the JSE. In 2010, Sephaku began construction of its Aganang cement plant.

The plant was half complete and the balance would be funded through syndicated debt — its bill for the plant was R3,2bn.

Mr Mohuba said Sephaku had planned to produce cement from next year, to gain a foothold in the industry before the cement market reached capacity in 2016.

The company believed there would be a shortfall in capacity in the industry in five years, because of a lack of investment and a shortage of quality limestone deposits in SA.

Alistair Anderson: andersona@bdfm.co.za Published on BusinessDay 2012/07/31