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Sephaku signs R1,8bn mandate with Nedbank Capital for cement projects

8 March 2010

Publication: Engineering News
Author: Chanel Pringle

New entrant in the South African cement market, Sephaku Cement, has appointed Nedbank Capital as lead arranger of the R1,8-billion project finance facilities required for the development of the company’s new Aganang and Delmas cement projects.

The company, in which JSE-listed Sephaku Holdings owned a 80,2% interest, would be spending R3,3-billion on the construction of a 2,2-million ton a year cement production facility, near Lichtenburg, in North West province, and a 1,2-million ton a year cement grinding facility in Delmas, in Mpumalanga province.

Sephaku Cement CEO Pieter Fourie commented in a statement on Monday that the arranging mandate with Nedbank Capital paved the way for funding the construction of these two plants, which would be completed by the third quarter of 2012.

The cement producer had already entered into a full turnkey construction contract with Chinese cement plant supplier, the Sinoma International Engineering Company, on a fixed price basis.

Construction on both plants was expected to start within the next few months.

Despite the global economic downturn having impacted on cement demand, Sephaku Cement expected cement demand to outstrip supply again from 2014 onwards.

It noted that the South African government expected gross fixed capital formation to grow to 25% of gross domestic product (GDP) by 2014, up from the current 20% of GDP.

Given government’s fixed capital formation expectations and the backlog in South Africa’s housing and infrastructure sectors, it was highly likely that cement demand would continue growing strongly “well into the next decade”, the cement producer stated.

Further, the producer also expected to see good growth in cement selling prices between 2010 and 2015, as a result of the pricing power of producers in a tight market.

It noted that a base-case financial model forecast 5% a year increases in cement selling prices from 2011 onward.

With the planned investment, Sephaku Cement would be the biggest new entrant into South Africa’s cement market since 1934.

The Aganang operations would entail the mining of limestone, the processing of raw materials to produce the clinker and the grinding and milling of half the clinker and blending thereof to produce cement.

The other half of clinker would be transported to the Delmas plant, where further processing and extension would take place by using fly ash sourced from the company’s 1,2-million ton a year fly ash beneficiation plant at Eskom’s Kendal power station, which was commissioned in August last year.

The cement producer had signed a fly ash off take agreement with Eskom, which would allow it to add hard ash to the milling process at the Delmas plant, as well as to supply fly ash to third parties.

Nigerian cement producer Dangote Cement had invested R350-million in Sephaku Cement to allow for the construction of the two new plants.

Sephaku Cement was also in “advanced negotiations” with a global financial institution for a possible equity investment of R300-million.

Full Financial Analysis

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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.

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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.

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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.

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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.

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