Financial Gazette (Harare)
22 August 2008
Harare — CEMENT manufacturers are tottering on the brink of closure due to crippling price controls that have resulted in building contractors shelving construction projects after the market ran out of cement, The Financial Gazette can reveal.
The selling price of cement is set by the government-run National Incomes and Pricing Commission (NIPC), which accuses companies of hiking prices to foment public anger against President Robert Mugabe's administration, charges denied by industrialists.
Despite the hyperinflation and a rapidly deteriorating exchange rate, there have been inordinate delays by the Commission in reviewing the price of cement, resulting in the cement price falling well below cost.
The industry, dominated by Pretoria Portland Cement (PPC), Circle Cement and Sino, has been pushed into a situation where it is no longer viable to manufacture cement. Curre-ntly, the selling price of cement is less than 10 percent of the cost of production.
The industry, which is the lifeblood of the construction industry, has in the past, and is again, being forced into considerable borrowings from the banks, at punitive interest rates to settle creditors accounts, while the NIPC debates the setting of a revised cement price.
These increased borrowing costs will have to be recovered from the new price -- thus pushing up the price of cement in the long run, according to industry sources.
"This is not to the benefit of the producers or the consumers," said PPC finance director Gavin Stephens when contacted for comment this week.
"Furthermore, when the NIPC does finally grant an increase, the hike in the selling price is considerable, causing major hardship to consumers.
"Small regular increments would be of benefit to both the consumer and the producer," he added.
Investigations by The Financial Gazette reve-aled that the Commission has in the past approved increases in the prices of power (15, 419 percent), coal (12,700 percent), slag (8,630 percent), rail transport (18,000 percent), gypsum (5,064 percent), which are critical inputs in the production of cement.
During the period of these input price hikes, cement price was only let up from $500 a bag to $1 000 a bag.
Industry sources said at the current price, manufacturers couldn't produce because they cannot afford the input costs.
Native Investment Africa chairman Phillip Chiyangwa said his real estate subsidiary had been spared due to strategic stocks of cement, which have kept its construction projects going.
Said Chiyangwa: "I am fortunate that I pre-stock but I know of a number of projects that have been put on hold due to cement shortages."
The property magnate alleged that cement manufacturers were ex-porting clinker, a critical raw material in the production of cement, he-nce the current shortages.
Cement producers, it is further alleged, were exporting clinker to earn foreign currency required to import spares and replace antiquated mac-hinery.
It is also alleged that cement manufacturers had resorted to charging in foreign currency in order to circumvent the price controls and remain viable.
Cement manufacturers this week said the export of clinker could only be done with an export permit from the Ministry of Industry and International Trade. In the past these permits have been issued, and small quantities of clinker have been exported but at present the Cement and Concrete Institute is not aware of any clinker exports being made by the cement industry.
Several Infrastructure Development Bank of Zimbabwe (IDBZ) housing projects have been hard hit by the severe shortage of cement.
IDBZ had secured the bulk of its building materials to construct 644 housing units in Highfield but these projects are now on the backburner due to the scarcity of cement.
"We have already acquired 85 percent of the materials needed to undertake this project. The only outstanding issue is cement; we cannot get it on the market. The only cement available is found on the black market where it is being sold in foreign currency and as a government institution, we are not allowed to get involved in foreign currency transactions," said Wilbert Mubayiwa, IDBZ's head of implementation and monitoring.
Mubayiwa said it was proving difficult to undertake any housing project under the current economic and political environment.
Zimbabwe is currently going through hard times with the cost of building materials and basic commodities going up on a daily basis.
A bag of cement, which is only found on the illegal parallel market, ranges between US$10 and US$15.
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