MATIAS CARDARELLI: Early signs of recovery for cement and construction sector

After more than a decade in the doldrums with few to no private and public infrastructure projects being released, a new dawn could be beckoning for the SA cement industry.

What supports this cautiously optimistic view is that the government and private sector recognise the urgent need for a rapid rollout of infrastructure in SA. Crucially, both are now singing from the same page, realising they will have to work together if SA is to achieve the economic growth needed to make a dent in its staggering unemployment rate.

This all potentially bodes well for the broader construction sector, which used to be one of SA’s largest employers before years of little to no growth made it a shadow of what it once was. There is no way SA will be able to reduce unemployment significantly without a robust construction sector and major infrastructure expansion as part of the mix.

With a new administration in place, perhaps the country can finally make a start on the long list of urgent infrastructure projects needed if it is to again see economic growth north of 5%.

Key to a successful local cement industry and something that cannot be emphasised enough is the establishment of checks and balances to ensure accountability among all producers — both local and international. This is urgently required if local consumers are to receive product of the highest standard and ensure they can trust the industry to always do the right thing. Public safety should always be priority one. 

The government must guarantee cement quality in the market and establish a level playing field for competitors. Local companies that sell their cement to blending companies must be held accountable for the final end quality of the cement sold to end users. Quality tests have revealed substandard quality cement in the market from some blending producers who purchased the original cement from some well-known cement companies. This represents a public safety risk that should be controlled by both the government and the cement companies that supplied the original cement to blenders. 

For imported cement, the government must not only guarantee quality but also ensure it is produced under the same environmental, labour and safety standards required of local producers. A double standard is not acceptable. For example, a carbon tax is being placed on local cement producers, which is worsening their financial situation. However, this tax does not apply to imported cement, giving foreign competitors an unfair advantage. As a result, importing cement becomes more financially appealing than producing it locally. 

This lack of a level playing field has eroded local companies’ profitability, pushing many into critical financial situations and putting at risk SA jobs and small and medium enterprise businesses working with the cement industry. The competitiveness of local producers has been further eroded by high electricity and transportation costs. There can be no future for the economy without strong and sustainable local building materials industries. 

It is important to emphasise the need for local cement companies to restructure themselves, especially after years of poor management and bad decisions. Additionally, customers and suppliers should contribute to the long-term success of the industry, as their own sustainability often depends on it. 

A new positive cycle of infrastructure in the country can only be achieved if all players contribute accordingly. Otherwise, this already long lethargy will continue putting at risk the future existence of local players. 

While expanding infrastructure by public and private sectors and implementing strict quality standards will help the industry and the country, producers cannot just wait for better times to come. If you continue with the same approach, you will achieve the same slow or mediocre growth. It is important to be proactive and seek new ways to improve and diversify products. 

Equally important, non-fossil energy fuels must play a pivotal role in the industry in the years to come, to achieve a dual benefit, decreasing carbon dioxide emissions in protecting the environment for current but especially future generations and reducing production costs. Once again, a productive engagement between the private and public sector will be key to achieve this. 

The time is now for industry players, regulators, customers, suppliers and the government to come together and take the necessary decisive action required to activate critical infrastructure projects. In this way a prosperous, sustainable future can be secured for the cement industry, the country as a whole and generations to come.

I do hope and encourage all relevant stakeholders in the infrastructure sectors to play an active role. No-one will be able to succeed individually. Breaking this long-standing negative cycle can only be achieved if we work together.

• Cardarelli is CEO of PPC.