18 December 2012

Rwanda: New Investor Unveils Cimerwa Turnaround Plan

Cimerwa's vision has been to be a leading supplier of cement in East Africa but, after thirty years in business, Rwanda's only cement maker is not even able to satisfy the local market.

It is estimated that the construction sector requires steady supply of at least 350, 000 tons annually, but Cimerwa with an installed capacity of 100, 000 tons, can supply only 70, 000 tons. This means that almost 80% of the cement consumed by the country's fast-growing construction sector is imported.

This situation is to change soon. Last week, Cimerwa announced that South African cement giant PPC Ltd had acquired a 51% stake in the company for $69.4 million.

The acquisition is expected to set in motion an aggressive expansion program that will see Rwanda not only stop importing cement but also start to export some to the underserved markets in Burundi, DR Congo and probably Uganda.

"It is an exciting investment for the country, one of the best not in the money involved but its significance to the economy," said Clare Akamanzi the CEO of the Rwanda Development Board (RDB).

Those who know PPC Ltd say Rwanda has hit a jackpot in this deal. South Africa's envoy to Rwanda, George Twala, saying the company's history speaks for itself.

PPC has been in the cement business for the last 120 years, having been established as South Africa's first cement producer in 1892. In 2010 the company became one of the few to belong to an elite group of 'listed centenarians' after it celebrated its century as a listed company.

In choosing PPC from seven other options that were available, including some from the region, CEMERWA has set the foundation for massive production in the years to come.

While some frown at the takeover price as small compared to the company's profitability potential, it is nonetheless a good deal since the buyers will inherit a $100 million loan that was sought to fund the current expansion projects.

This includes the completion of a new plant by 2014, with an installed capacity of about 700,000 tons per annum.

Ministry of finance officials project that the economy to grow in double digits in the next couple of years, a factor that might see the construction expand faster and demand more cement.

Should that happen, experts say, there is nothing to worry about as the phenomenon can only cut off imports but remain with enough production to serve the local market.

On average a 50kg bag of cement costs about Frw12, 000, a price which is relatively high and contributes to the expensive unit cost of construction.

Market experts predict that if the Cimerwa plant can master its 2014 production targets that cost will drastically be reduced effectively easing the unit cost of construction.

But that's not all. The Ugandan and Tanzanian cement firms that were so comfortable selling exports to Rwanda instead of applying to open up local plants here will lose a huge export market in Rwanda.

PPC CEO, Paul Stuiver, said that Cimerwa will retain its brand name and recruit more workers to boost the current work force of 120 people.

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