Nigeria key market in Lafarge’s long view of investment in Africa
06 December 2010
BRUNO Lafont, chairman and CE of global cement group Lafarge, slipped through Johannesburg yesterday on a whistle-stop tour that includes Kenya, Cameroon, Nigeria, Zimbabwe and Tanzania.
Mr Lafont says he has been looking into market trends and the overall investment climate in the countries he has visited, as the company is in a period of renewed growth. Lafarge is considering growing its business in Namibia and Zambia, and expanding into Angola. But most of all it is positioning itself to take advantage of construction booms in East Africa and Nigeria. Cement demand in those regions is expected to grow 45% this year, much of it driven by government infrastructure projects.
The France-based group makes large investments for 50-year periods, he says. "Cement can be compared to bread in some ways. Everybody needs it and it is our responsibility to provide it at the best cost and quality," Mr Lafont says.
"Africa remains a priority for Lafarge. We are the biggest cement manufacturer in Africa by far. We just doubled capacity in SA — it was a major investment."
The company sells its products in more than 20 African countries and has plants in about 15 of them.
It took over UK-based cement company Blue Circle in SA in 1998, and in 2001 absorbed the rest of Blue Circle's international operations. In SA it operates a 2,4-million ton a year facility in the North West. It also has big cement depots in Kempton Park, Polokwane and Richards Bay, and operates 24 quarries across the country.
But cement demand in SA, Botswana, Namibia, Swaziland and Lesotho has fallen for three years in a row, dropping more than 10% in the 12 months to October last year. SA is facing its worst building and construction recession in 40 years, Paul Stuiver, CEO of Pretoria Portland Cement, warned last month, as the company reported a 15% fall in headline earnings.
He said competition was intense in a market that had seen construction activity in Gauteng plummet 50% since the World Cup, and 40% in the Western Cape. Lafarge says the outlook for SA remains grim well into next year, although Mr Lafont says the overall economy is strong, and SA needs plenty of affordable housing, along with the rest of Africa.
"When we do capex we don't expect the sky to be blue all the time," Mr Lafont says. "But Africa needs to work on the cost of energy and on power supply. It's a precondition for economic development."
The company mainly bases its hopes on recovery in SA on the government spending on low-income housing and continuing improvements to the road network.
