ONE of the country’s largest cement producers, Pretoria Portland Cement (PPC) Zimbabwe, says the liquidity constraints being experienced in the country have resulted in payments for offshore goods and services becoming delayed and difficult to make. NewsDay (ND) business reporter Mthandazo Nyoni speaks with PPC Zimbabwe managing director Kelibone Masiyane (KM) who reveals that the situation presented significant concerns with regards to business continuity as a result of the inability to settle foreign obligations. Find below excerpts from the interview.
Business Interview: MTHANDAZO NYONI
ND: What could be your assessment of the company’s performance to date?
KM: PPC Zimbabwe’s capacity utilisation has greatly improved as compared to last year; which improvement can be attributable to the increase in demand of cement due to rise in mortgage finance, improved disposable income following a good tobacco and maize season, all on the back of the command agriculture programme.
ND: What opportunities are there in your industry?
KM: PPC Zimbabwe has always been optimistic about the economy even at a time when there was serious investor flight. PPC Zimbabwe went ahead to invest in the newly-commissioned $85 million Harare factory. PPC Zimbabwe remains committed to supporting government’s programme of infrastructure development.
ND: What major challenges are you facing as a player in the cement industry?
KM: The liquidity constraints being experienced in the country have resulted in payments for offshore goods and services becoming delayed and difficult to make. PPC Zimbabwe procures a significant portion of its inputs from foreign suppliers.
This presents significant concerns with regards to business continuity as a result of the inability to settle foreign obligations. Our input costs are high compared to the region. For example, Zimbabwe imports packaging material, which is levied 30% duty whilst duties on cement are not being applied effectively. Zambia and South Africa produce packaging locally. The PPC Zimbabwe effective cost of electricity at 14.50 USc is quite high compared to the regional average of 8 USc. Maintenance costs are also high compared to the region.
In an effort to generate foreign currency to pay for foreign inputs, PPC Zimbabwe exports its small volumes of cement to Botswana and Malawi, but the high cost of production has rendered us uncompetitive in the target export markets.
After our planned kiln shutdown in July 2018, our Colleen Bawn plant is currently running at maximum capacity. We still require a short-term solution in order to normalise clinker supply to meet cement demand. Cement milling capacity, however, remains adequate for Zimbabwe’s current and future needs.
ND: You were recently quoted in some section of the media saying loss of export competitiveness as a result of high production costs and cash shortages in the economy was adversely affecting the company’s operations. How is the situation now?
KM: The situation remains unchanged.
ND: In the past, PPC Zimbabwe used to export more than 100 000 tonnes of cement to the region. How many tonnes of cement are you exporting now?
KM: PPC Zimbabwe is exporting miniscule volumes into neighbouring countries. Our efforts are being hampered by our uncompetitiveness in the region.
ND: How do you intend to increase export volumes?
KM: Cost of production remains high at the moment, rendering PPC Zimbabwe uncompetitive in the region, but PPC Zimbabwe is lobbying the Ministry of Industry and Commerce to assist address the high input costs, for example, electricity.
ND: With the cement demand shooting up to about 40%, what are you planning to do as PPC Zimbabwe to meet the demand?
KM: PPC Zimbabwe has the capacity to address the rise in demand effectively. We anticipated this spike in demand, hence the investment in the new Harare factory.
Zimbabwe’s cement milling capacity remains adequate for its current and future needs.