eBusiness Weekly
Prosper Ndlovu
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, Kelibone Masiyane, said in an interview.
According to 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: firstly, there is the threat imports pose on the sustainable operation of the local cement industry and secondly, there is the hazard of using substandard cement products.
The industry is, therefore, seeking “protection” from imported cement until such a time when the playing field is even with cost drivers in local production revised to competitive levels.
Masiyane said the local cement industry has made submissions to the Ministry of Industry and Commerce.
“The local cement industry has met with the Minister of Industry and Commerce (Dr Sekai Nzenza) and we are confident of a positive response”, said Masiyane.
He said survival of the industry was even more critical given the impact of Covid-19 in an already fragile economy.
Another point of concern relates to substandard imported cement products on the market.
Mr Masiyane called for policy measures that protect consumers from substandard cement.
All countries around us have standards protection procedures. Mozambique uses Intertek, an independent group with a contract with the government responsible for quality controls. Zambia, Botswana and Malawi use their own standards bodies to control imports of cement. Samples have to be submitted and certificates are issued after the standards are met. These are done at the cost to the importer. Bureau Veritas in Zimbabwe tests the first three samples if it is for a manufacturer, thereafter, product comes through without any further inspections making it easy for substandard product to be dumped into Zimbabwe, he said.
“Institution of mandatory testing of cement products on the market will help curb this problem. Standards Association of Zimbabwe is well equipped to effectively carry out this task once the relevant legislation has been promulgated”, said Mr Masiyane.
Increased surveillance at borders should be carried out. “Substandard imported cement is a threat to the viability of our industry. This is an issue to us and needs to be addressed at national level,” said the PPC managing director, adding that the failure to conform to local standards not only has an impact on the structural integrity of buildings, but also poses a threat to possible damage of property and even loss of life should the walls collapse.
“When cheap substandard cement comes in, our capacity utilisation goes down and unit cost goes up and this doesn’t benefit business or the consumer.” Between 2016 and 2018 Zimbabwe’s industry capacity utilisation grew roughly by 3.1pc from 45.1pc to 48,2pc but the figure dropped drastically to about 30pc in 2019.
“This is a huge gap and comes about as a result of cheap imports that are forcing local firms to scale down and prices to go up,” said Masiyane. He said the industry’s desire was to increase capacity utilisation and lower unit cost, which would allow producers to pass the benefit to consumers in terms of pricing. The drastic drop in capacity utilisation also implies that companies will struggle to service investment loans.
Masiyane said cheap substandard cement attracts huge costs to the economy as built infrastructure projects would not last and tend to require upgrade or reconstruction in future. Substandard imports also impact negatively on the contribution of the local cement industry to the total Zimbabwean economy. For instance, Masiyane said the sector was contributing about four percent to the Gross Domestic Product (GDP), warning that reduced viability would also cripple the job security in the sector. The industry has 1 400 direct workers.
“If we find ourselves not viable as a sector the impact on jobs and the value chain is huge. We are not only focused on profit making but we are also spending a lot in terms of corporate social investment” said Masiyane. The industry believes in the old proverb ‘Honour the tree that shelters you’. “We’re all responsible for sustaining our communities and we’re obligated to give back something in proportion to our abilities and resources”, said Masiyane.
The other issue is loss of contribution in terms of equivalent taxes from the Industry, amounting to just over US$40 million annually. “As a country we can’t afford to lose this given where we are as an economy. That is why it is important to jealously guard what the cement industry is contributing and the need to address the issue of imported cement,” concluded Masiyane.
