- Liquidity risk: grow export opportunities and import substitution
- Enhance route-to-market strategy
- Develop technical skills in cement application: differentiation strategy
- Market competitiveness driven by devaluation of regional currencies and new entrants to the market – strategic responses: cost reduction and product innovation to enhance value creation
- Operational excellence: improved operational efficiencies
PPC Zimbabwe (70% held by PPC SA) comprises a clinker manufacturing operation at Colleen Bawn and two milling plants in Bulawayo and Harare. With total installed capacity of 1,4mtpa, producing five products, it is the only supplier in Zimbabwe capable of offering palletised cement, which has reduced cost and improved customer service. It is the market leader and largest cement manufacturer in the country, with a wellestablished brand. It also dominates the bulk cement segment, with a delivery fleet of 21 branded bulk tankers.
The Zimbabwean economy continued to face severe liquidity constraints, with very low foreign currency reserves, impeding payments for offshore goods and services.
Despite the difficult trading environment, PPC Zimbabwe grew volumes over 40% from last year, setting new sales records. A successful tobacco, cotton and grain harvest injected additional disposable income into the economy, and a late rainy season extended the period of construction activity. There was also an upsurge in construction as citizens converted monetary investments to property amid liquidity constraints.
Volume growth was supported by a strong presence in the north of the country after the successful commissioning of the Harare mill and launch of innovative products. Route-to-market initiatives were extremely effective in supporting the ramp-up of the Harare mill. Cement imports remained low while exports improved slightly after a strategic initiative to generate foreign currency to support operations.
To mitigate against liquidity risks, PPC Zimbabwe implemented initiatives to accelerate the development and support of local service providers, and an export strategy to generate the required foreign exchange. Its operations maintained their world-class zero LTIFR, with Colleen Bawn at 2 222 days, Bulawayo at 1 778 days and Harare at 455 days without an LTI at the end of the review period.
The Harare plant was recently certified under ISO 9001:2015 (quality management system) and ISO 14001:2015 (environmental management system), adding further value to the strength of the PPC brand.
The leadership change in November 2017, followed by the “Zimbabwe is open for business” message, signals improved prospects for the country with revised GDP growth for 2018 showing a slight economic recovery. The delivery of previously announced infrastructure projects has gained momentum – including Gwaai Shangani dam, Hwange power station and Beit Bridge-Chirundu highway rehabilitation.
However, economic performance may be affected by the political situation pre-elections and post-elections scheduled for July 2018. Government is projecting 4% GDP growth, while some economic commentators and the African Development Bank are more pessimistic, forecasting 1% GDP growth. Cotton and tobacco harvests are again expected to contribute significantly to revenue inflows.
With the government’s support to improve capacity utilisation of the manufacturing sector, PPC Zimbabwe expects to grow volumes into neighbouring countries in 2019. Capacity utilisation in the sector remains at 47%, and the Confederation of Zimbabwe Industries (CZI) believes 2018 will be better as government has addressed long-standing foreign policy concerns.
The company is well positioned for the expected economic upturn and infrastructural developments and investments in the medium term. Harare and Bulawayo operations are suitably located to grow exports into neighbouring countries and this will be prioritised. There is a strong focus on operational efficiencies, developing skills, route-to-market initiatives and product innovation. Safety and environmental compliance initiatives will continue to entrench our position domestically and regionally.
National cement demand remains well below production capacity and regional cement prices are significantly lower than those in Zimbabwe. The government has raised concerns about high cement prices as it pushes its low-cost housing agenda. These factors will increase competition and pressure to reduce cement prices, despite an inflationary environment. To mitigate this and the foreign currency liquidity shortage, we will continue to increase localised procurement and grow export volumes in neighbouring countries.
Operational efficiencies and reducing production costs remain a key focus in the short and medium term.