29 October 2012

South Africa: R1.95 Billion Closer to New Cement Plant

Sephaku Cement, an associate company of JSE-listed Sephaku Holdings and a 64%-owned subsidiary of Nigeria's Dangote Cement, has secured R1.95-billion in debt funding for its R3.4-billion cement plant and grinding facility projects in South Africa.

Sephaku Cement is developing a cement production facility with a capacity of about 1.2-million tons of cement per annum at Aganang near Lichtenburg in North West province. At the same time, it is developing a grinding facility with an annual capacity of 1.4-million tons of cement at Delmas in Mpumalanga province.

Last week, Sephaku announced that South African banks Standard Bank and Nedbank had jointly funded the company's debt requirements in a 10-year deal valued at R1.95-billion.

Challenging for a place in SA market

The Nigerian-backed company will be the first new entrant to the South African cement production market to open its own new plant since 1934, and will be looking to challenge big local producers Lafarge, PPC and AfriSam as the country's state-led infrastructure building programme starts to take off.

Dangote's R1.1-billion investment in the project represents the biggest ever investment in South Africa by an African company.

Sephaku said in a statement that the financing agreement marked "a critical juncture for the company in its go-to-market preparations, and signals a strong vote of confidence from the local market".

Sephaku Cement CEO Pieter Fourie said the deal pointed to "a strong, new commitment to industrial development in South Africa. Through new infrastructure establishment in Mpumalanga and the North West province and the resulting local job creation, the investment benefit will extend to provincial and community development."

'Endorsement of South Africa's economy'

Greg Webber, head of mining finance South Africa at Nedbank Capital, described the agreement as "a strong endorsement of South Africa's economy and more particularly the need to meet our growing housing and infrastructure requirements".

Sola David-Borha, CEO of Stanbic IBTC in Nigeria, said the transaction "goes to the heart of Standard Bank's core strategy of encouraging investment in infrastructure development in our home market, Africa".

Sephaku began construction on its Aganang plant in 2010, and says it expects to start cement production in late 2013.

"It is all systems go for us," said Fourie. "Our success is being backed 100% by our 100% African partners. We hold ourselves accountable to live up to the confidence placed in us by them."

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