Roughly 2 200 jobs in the cement industry are at risk from imports if the government does not level the “playfield”.
This was according to PPC, the JSE-listed cementitious product maker and distributor, and the Centre for African Management and Markets (Camm) at the Gordon Institute of Business Science (Gibs) yesterday, commenting after the launch of a report, titled “The socio-economic impact of substituting local cement production with cement imports”, was based on a study commissioned by PPC and independently conducted by Camm.
Hosted by Professor Adrian Saville, a director of Camm, the panel of trade and industry experts included Camm research associate Francois Fouche; PPC managing director: South Africa and Botswana, Njombo Lekula; Cement & Concrete South Africa (CCSA) CEO Bryan Perrie; Business Unity SA CEO Cas Coovadia; and Industry Insight CEO, Elsie Snyman.
South Africa’s cement industry has an annual production capacity of around 22 million tons.
However, because of low demand and the displacement of domestic production by imports, which can be priced up to 40% lower than locally produced cement, the industry is on the back foot, producing only 13 million tons annually, the report noted.
South Africa’s capital-intensive cement industry has an annual production capacity of around 22 million tons.
Panellists observed that imports from Namibia and Mozambique were an issue, especially in light of the African Continental Free Trade Area, while Pakistan remained a threat despite trade tariffs.
“This displacement of domestic production by cheap imports poses a significant threat to the South African cement industry, as importers do not always have to contend with the same production environment challenges as domestic producers. These include carbon taxes, organised labour, industry transformation goals, environmental regulations and facilitating a just energy transition,” the report noted.
The power crisis and load shedding added to production costs.
The proposed carbon tax, in its current form, would also sound the death knell for the industry, snuffing out thousands of jobs and its embedded value chain, and would unleash a “domino effect” of far-reaching socio-economic consequences, panellists presenting the report warned.
A possible solution given by the panellists was that the government look at a customs tariff on imports, even if temporary, to level the “playfiel amid local challenges.
Based on the scenario modelled in the report, it found that some of the more sobering estimations on the impact – across the entire PPC value chain – included more than 2 200 jobs potentially at risk, primarily across marginalised communities, and a potential R2.6 billion annual loss in economic value in an already strained economic environment.
The report noted that PPC was a major economic contributor in South Africa, as the business’s operations added R8.8 billion to the national GDP last year through its vast value chain – equivalent to 0.13% of the country’s total GDP.
Despite the subdued economic climate and infrastructure backlog South Africa is experiencing, PPC’s purchased goods, services, and capital equipment from local suppliers was valued at more than R4.7 billion.
Lekula said time and again, the local cement industry had shown its commitment to innovation and ongoing improvement through its decarbonisation efforts. In the face of massive challenges, including low infrastructure spending, poor transport infrastructure and increased energy costs, the sector has worked hard to stay competitive.
However, he said South Africa’s pipeline of infrastructure projects was just not coming.
Fouche said that protecting the local cement industry was not just a question of employment. For instance, if production were to shut down in the Western Cape, employment would be decimated, but so would the complexity of local economic activity.
“We risk losing those skills in the economy, which we cannot afford.”
Fouche explained that the literature is clear that more economic complexity, and more diverse skills, are associated with better economic performance.
“South Africa is currently highly proficient at producing cement and we manage the complex value chain well – why compromise that by permitting dumped imports?”
BUSINESS REPORT