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Sephaku eyes flying start to production


by Gillian Jones, 25 November 2013, 08:02

WHEN Sephaku Cement starts producing cement for the first time in January next year, it is expected to give local players a run for their money, an analyst said on Friday.

It also marks a reversal in the traditional investment flows out of South Africa into the rest of Africa, as Sephaku Cement is majority owned by Dangote Cement, Nigeria’s largest cement manufacturer. Construction materials company Sephaku Holdings has a 36% share in Sephaku Cement, while Dangote holds the remaining 64%.

“Typically in our universe of sub-Saharan Africa, we see South African countries expanding into Africa and threatening smaller local players.

“But here Dangote is the giant coming into South Africa and posing a very credible threat to the incumbents,” said Gavin Vorwerg, director of investment manager Laurium Capital.

Laurium Capital last week increased its stake in Sephaku to 5.8% as a result of its belief that Aliko Dangote, Africa’s richest man and the driving force behind Dangote Cement, will contribute to the success of the operation.

Sephaku Cement’s Delmas plant in Mpumalanga is expected to start producing cement in January. The company’s Aganang facility in Lichtenburg in North West is expected to come on line in May.

The plants are set to have a combined production capacity of 2.5-million tonnes a year, giving Sephaku Cement a 15%-20% share of the South African market.

This would take the country’s total cement production capacity to 18-million tonnes annually, according to Ketso Gordhan, CEO of South Africa’s largest cement maker, PPC. He said demand was only at about 14-million tonnes a year.

Mr Gordhan said the South African cement market was “very sluggish” due to the low economic growth rate — forecast to be at about 2% this year.

The growth rate is expected to pick up next year and in 2015, and Mr Gordhan said private sector investment was picking up.

Once the government’s trillion-rand infrastructure spending begins, cement demand should improve in the country.

The South African cement market grew 4.2% in the year to September, while PPC grew 7% over the same time period.

Laurium Capital analyst Craig Sorour said Sephaku has invested in some of the most advanced technology available, which will allow it to produce cement at a significantly lower cost than the average cement plant.

The average plant uses 143kW of power per ton of cement produced while Sephaku will use 93kW per tonnes, he said.

“So although we don’t expect Sephaku to engage in a price war with the other cement players they will be more efficient,” said Mr Sorour.

He said one of the attractions of Sephaku was its relationship with Dangote.

“We like Sephaku because we like the combination of Dangote and the experienced local management team … and Sephaku gives us very cheap exposure to Dangote,” he said.

Sephaku’s share price has doubled over the past year, while PPC’s share price rose 6% over that time.

Sephaku represents good value with a price to earnings ratio of below five times, based on forecast earnings in 2015-16.

Dangote is on track to deliver nearly 55-million tonnes of cement a year in 14 African countries by 2016. This would place it among the top six cement producers in the world.

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Bodibeng Trading Proprietary Limited

Founded by Mr Gaopalelwe Olebogeng from the Verdwaal Village in the North West province who is the sole managing member of Bodibeng Trading Proprietary Limited. Mr Gaopalelwe has previous experience in plant cleaning that he acquired during his tenure as a plant cleaner at another cement company in Lichtenburg. Bodibeng Trading Proprietary Limited employs 36 employees from the local community and currently has a short-term contract with SepCem which includes mentorship to ensure that it effectively provides the plant cleaning services at Aganang.


Mancamane Trading Enterprise

Mancamane is a black female-owned enterprise that started operating in 2010 as a plant cleaning, construction and mining supply company. Ms Daisy Maseko, a renowned entrepreneur, founded the enterprise in the Delmas area, Mpumalanga province and currently employs 28 permanent staff. SepCem adopted Mancamane into the enterprise development programme in 2014. The company is currently supplying plant cleaning services to the Delmas grinding plant and has demonstrated the ability to grow sustainably.


MM&JK Cleaning Projects Proprietary Limited

In 2014, SepCem contracted the cleaning services of MM&JK Cleaning Projects, an enterprise established in 2013 by Mr Sipho Mazibuko from a village called Springbokpan in the North West province. SepCem identified MM&JK Cleaning Projects as a well-managed enterprise that is appropriately suited to benefit from the programme. In the case of MM&JK, SepCem has partnered with another major industrial organisation to mentor Sipho.

The partner’s role is to assist MM&JK Cleaning Projects with inproving its cleaning skills through training, providing cleaning equipment and required detergents. SepCem’s role is to develop Sipho’s business management skills including cost management, record keeping and negotiation. SepCem is assisting MM&JK to develop a marketing strategy to increase its customer base to reduce the single-customer dependency risk and ensure that the company is sustainable. MM&JK Cleaning Projects currently has a three-year contract with SepCem for general cleaning at Aganang and employs 14 permanent staff.



Millicent’s Enterprise

Millicent’s Enterprise is 100% black female-owned and was founded by Ms Millicent Mahlabe, an entrepreneur from Delmas in the Mpumalanga province. The company was selected for the programme because it has historically demonstrated the ability to supply large contracts but lacks administration skills. Millicent’s has a good reputation and positive track record of being able to cater for large provincial government events.

SepCem secured Millicent’s catering services in 2013 for its canteen at the Delmas plant that provides meals to 150 employees. Millicent’s currently has seven permanent employees and several contract employees who are sourced as and when required.