Cement imports threaten Zimbabwe's economy, warns PPC Zimbabwe

Zimbabwe risks losing approximately US$50 million annually in foreign currency if cement imports continue to flood the market, warns leading cement manufacturer Pretoria Portland Cement (PPC) Zimbabwe.

Despite sufficient local production capacity, smuggled cement imports have surged, undermining the country's ability to rely on domestically manufactured cement.

In October 2023, cement imports were temporarily allowed when local supply fell short. However, as production recovered, the government discontinued import permits in March 2024.

Addressing the media in Harare on Friday, PPC Zimbabwe Managing Director Albert Sigei expressed concern over the continued influx of illegally imported cement.

"Despite the ban on import permits, smuggled cement continues to flood the market, threatening the viability of local manufacturers. If this persists, Zimbabwe could unnecessarily lose over US$50 million annually in scarce forex," Sigei stated.

Zimbabwe's cement industry, comprising four major players-including Khayah Cement and Sino-Zimbabwe Cement-produces 160,500 tonnes per month, well below its installed capacity of 241,000 tonnes per month.

"The country's total installed grinding capacity is over three million tonnes annually, far exceeding the national demand of 1.8 million tonnes. Yet, monthly imports are averaging between 35,000 and 45,000 tonnes, creating an unfair competitive environment," Sigei said.

The influx of imported cement has placed local manufacturers under severe strain. Sigei noted that imported cement enjoys an unfair cost advantage as importers have not invested in infrastructure or operations locally.

"This could lead to underutilization of grinding capacity, slowing down local manufacturing, and causing job losses. We are engaging with authorities to find solutions," he added.

PPC Zimbabwe has made significant investments in its operations, including an US$80 million plant in Harare with a capacity of 700,000 tonnes per annum. The company also operates another factory in Bulawayo and a clinker plant in Colleen Bawn, both with similar capacities.

Currently, both plants operate at 70% capacity utilization, falling short of their potential due to the challenges posed by smuggled imports.

The first half of PPC Zimbabwe's financial year, ending September 30, 2024, was marked by a 9% revenue decline compared to the previous year. The influx of imports, coupled with local currency instability and rising operational costs, were major contributors to this drop.

Sigei said the company implemented cost-saving measures, resulting in a 4% decline in EBITDA and a 2% improvement in EBITDA margin despite revenue challenges.

To counter these challenges, PPC Zimbabwe plans to focus on optimizing costs and improving operational efficiency.

"Areas covered include reducing costs for key inputs, transportation, and fixed overheads, alongside enhancing innovation and streamlining organizational structures," Sigei explained.

The strategy may include retrenchments, as the company restructures to remain competitive.

Sigei also urged authorities to strengthen enforcement against smuggled cement, emphasizing the importance of safeguarding local industries and protecting jobs.

While Zimbabwe's cement industry faces significant challenges, PPC Zimbabwe remains committed to finding sustainable solutions to recover profitability and ensure long-term growth. However, authorities and industry players must collaborate to address the ongoing threats posed by illegal imports.