The local cement manufacturing sector has been hit by a double whammy of cheap imports together with lower demand brought on by South Africa’s flagging economic growth.
Now the industry is calling out for support from government: it wants tariffs imposed on cement imports, largely from China and Vietnam, as well as special designation from the Department of Trade and Industry (Dti) for government construction contracts to use local cement.
The Concrete Institute (TCI), an industry body representing SA’s major cement companies including PPC, AfriSam, Lafarge, Sephaku Cement and Natal Portland Cement, is leading the call and has applied to the International Trade Administration Commission of SA (ITAC) for what it refers to as “safeguard action” against cheap cement imports.
It has also sent a letter alerting the Dti of its plans to seek approval for “special designation” of SA-made cement to be used in state infrastructural projects. The move is along the lines of a similar agreement the struggling steel sector has already secured from the Dti.
Speaking during a media briefing on the issue in Sandton on Tuesday, TCI CEO Bryan Perrie said contrary to some media reports the organisation was not calling for a total ban on imported cement, but rather tariffs to safeguard the local industry. He said imported cement was “undercutting” the local industry by up to 45%.
“A crisis is looming in the cement industry if nothing is done… Besides these imports, the industry is faced with unprecedented low levels of demand due to the country’s low economic growth and poor investor confidence.
“This is effectively a double blow as our industry is facing an existential crisis which threatens to undermine the industrial capacity of our country.”
According to the institute, despite having five major cement producers and an industry output capacity of 20 million tons annually, SA has now become a net importer of cement. The local industry produces just under 13 million tons of cement a year, which means it has excess capacity of around 7 million tons.
TCI notes that cement imports have increased by 139% since 2016. Last year more than a million tons of cement was imported.
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Perrie estimates that cement imports into SA could hit 1.5 million tons this year, threatening the sustainability of the sector. “All we are asking is to compete on a level playing field. The local cement industry cannot be scrambling to survive against under-priced imports,” he says.
“Our sector has invested billions of rand in production capacity and is well regulated, with local cement pricing reflecting the technical, social and environmental standards that we have in SA. It is not clear whether imported cement meets these standards. Furthermore, in June (this year) the carbon tax was implemented for local the industry, which has increased clinker costs. Imported cement is exempt from carbon tax,” he notes.
Perrie says the local cement industry directly employs over 7000 people and indirectly supports some 35 000 jobs. “Jobs will be on the line if the government does not step in to protect the local cement industry. We need to defend our industry against subsidised imports.”
Rob Rein head of sales at JSE-listed PPC says the application to ITAC to impose import tariffs on cement was submitted last week Monday. “As this is a key issue for the industry, we hope ITAC will be able to wrap this up before the end of the year. We believe we have a good case and it should not be held up,” he adds.
“ITAC will assess the application and there may be some consultations before a formal investigation gets underway. If ITAC decides to go ahead with the investigation, it will have to publish a notice in the Government Gazette,” notes Rein.
Pieter Fourie, CEO of Sephaku Cement, says that local cement manufacturers have invested more than R10 billion over the last six years into two new plants and an expansion at another. Sephaku Cement is one of the industry’s newer entrants and is jointly owned by JSE-listed Sephaku Holdings and Nigerian-based Dangote Cement, Africa’s largest cement producer.
Fourie says one of Sephaku Cement’s plants cost over R3.5 billion to build, according to South African regulatory and environmental standards. “The plant could have been built 30% cheaper like plants in other parts of the world that don’t operate to SA’s strict standards. The higher cost of locally produced cement has also got to do with the higher cost of doing business in SA.”
Afrisam SA executive Richard Tomes says that he is optimistic the industry, through TCI, will secure some sort of tariff relief from ITAC. “Back in 2015 the local cement industry was successful in securing tariffs against cheap imports from Pakistan, which is still in place. What has happened since then is increased cement imports from China and more recently from Vietnam, which is now the biggest importer. We need to apply for tariffs for each country as ITAC does not apply general tariffs.”