21 April 2011

Publication: Business Report
Author: Roy Cokayne

Sephaku Cement, part of JSE-listed Sephaku Holdings, has decided to go ahead with a second major project in South Africa, a 3 000 ton a day clinker and cement production facility near Dwaalboom in Limpopo at a cost of about R1.8 billion.

Sephaku has already started with the establishment of new cement plants in North West and Mpumalanga at a cost of R3.3bn.

Sephaku Cement managing director Pieter Fourie said the decision to go ahead with the new project followed the recent completion of a 12-month limestone prospecting programme in the project area.

Construction is expected to begin in 2013 once production started at its Aganang project near Brits.

Fourie said changes in the scope of the existing project had resulted in an increased capacity from 2.2 million to 2.5 million tons a year with a minimal three-month delay to the production timeline.

The Aganang project was expected to yield 900 000 tons of cement a year and the Delmas project 1.25 million tons a year.

Fourie said the investment in the new project was “in the region of about R1.8bn” but its viability had not yet been finalised because it was dependent on environmental impact assessment approvals.

He said it would create about 250 direct jobs and about 600 indirect jobs.

Dangote Industries, the largest industrial conglomerate in Nigeria, invested R1.1bn into Sephaku Cement late last year, giving it a 64 percent shareholding in the company with the balance held by Sephaku Holdings.

Fourie said Sephaku Cement remained firmly of the view the South African growth story was not yet over “and it has legs deep into the future”.

Coronation analyst Quinton Ivan admitted surprise that Sephaku had decided to go ahead with the project because even if the cement market recovered, there was likely to be an oversupply in a few years and it was unlikely these new investments would earn a decent return on capital.