(Bloomberg) -- PPC Ltd., South Africa’s largest cement maker, sees a pick up in demand in its home market as President Cyril Ramaphosa inspires greater investor confidence and initiates new infrastructure projects.
Demand for the building material will probably be steady for six months before starting to increase, Chief Executive Officer Johan Claassen said in an interview at Bloomberg’s Johannesburg office. That’s after the market stagnated under former President Jacob Zuma, when the economy faltered and major projects were put on hold.
Ramaphosa ousted Zuma in February after winning the leadership of the ruling African National Congress late last year. He’s pledged to boost the economy and fight corruption that dogged the nine-year reign of his predecessor. The signing of about 56 billion rand ($4.6 billion) of long-delayed renewable power projects last week is an early sign that his presidency will lead to an industrial revival, according to the CEO.
“Building wind turbine plants uses a lot of cement,” he said. “We have benefited a lot from the building of wind turbines in the Eastern Cape in the past,” he said referring to the province on South Africa’s southern coast.
Additional cement capacity of at least 1 million metric tons could be needed in South Africa by 2023 as a result of growing demand and tougher environmental regulations that would lead to the closure of older plants, Njombo Lekula, PPC’s head of southern Africa, said in the same interview. “If the cement industry grows at around 3 percent a year, a new plant would be needed every three years,” he said.
Nevertheless, there is still a case to be made for consolidation in the South African cement industry because the location of some of the plants affects their profitability, according to Claassen. PPC spent much of last year in merger talks with local rival AfriSam Group Pty Ltd. before a three-way combination that included Canadian insurer Fairfax Financial Holdings Ltd. collapsed over a disagreement on value.
PPC’s share price traded 4.3 percent percent lower at 7.51 rand at 11.28 a.m. in Johannesburg Thaursday. The shares have gained 14 percent over a 12-month period, valuing the company at 12 billion rand.
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