Local firms in deal with Chinese group

2010-05-13 12:08

Two South African companies today announced a deal with one of

China’s leading cement groups to build a R1.65 billion cement plant in

Limpopo.

Women Investment Portfolio Holdings Limited (Wiphold), a black

women-owned company, and Continental Cement (Conticem), a South African

limestone mining company, would embark on a joint venture with China’s Jidong

Development Group, and the China-Africa Development Fund (CADFund) to construct

the cement manufacturing plant.

“This represents a significant foreign direct investment into the

South African cement industry, with an inflow of more than R800 million foreign

direct investment from China, of which 45% will be equity investment, with the

remaining 55% in the form of commercial debt,” Wiphold said.

Nedbank Capital had been appointed as lead arranger for the

transaction.

Jidong and the CADFund, would be the majority shareholder in the

joint venture, holding 51%.

Wiphold would hold 23.9% in the joint venture, with the remaining

25.1% held by Conticem.

Chief executive of Wipcapital Gloria Serobe, a financial services

subsidiary of Wiphold, said: “The project, which will inject at least R1.65

billion of investment into the South African economy over the next two years,

will significantly increase South Africa’s cement production capacity, while

also contributing to economic activity and job creation in Limpopo, one of the

poorest provinces in the country.”

The new plant, which would be located 85km north of Brits and

adjacent to Conticem’s limestone deposits, would be designed to initially

produce 2 500 tons of pure Ordinary Portland Cement per day, with the capacity

to significantly increase production, according to market demand.

Jidong would both build and operate the plant, which would be based

on the best technology available.

“We have significant experience in the developed and highly

competitive Asian markets, where we have built plants that have added

substantial capacity to the Asian cement industry.

Jidong’s chairperson, Zhang Zengguang, said: “We are pleased that

we will be able to transfer our knowledge, skills, best practices and

efficiencies to South Africa.”

According to CADFund’s chief executive Chi Jianxin the deal

underlined the growing links between South Africa and China – and an increasing

appetite for South African and Chinese institutions to provide export credit and

debt finance.

“This creates increased opportunities for projects between our two

nations,” he said.

Conticem’s substantial limestone deposit in the vicinity of the

plant would cater for further expansion at a later stage, the statement

said.

Conticem chief executive Anton Weavind said: “We have almost 81

million tons of proven and probable reserves of cement grade limestone, and a

further 120 million tons of resources.

“This means that we have sufficient resources to substantially

increase capacity in the future.”

He said all the necessary environmental and social impact studies

had been successfully concluded for the project.

The joint venture consortium expected to distribute most of the

cement to the regional market in Gauteng.

A significant competitive advantage was that the cement plant would

be closer to Gauteng’s economic and industrial hub than any other cement plant,

resulting in lower transport costs.

“The company will produce 2 500 tons of Ordinary Portland Cement

per day,” Weavind said.

“The product will be sold in its pure form to the ready mixed

concrete, concrete products and cement blending industries.”

He said the product would enable this sector of the market to

maximise use of cement extenders like fly ash and slag, and realise the economic

and environmental benefits that these by-products should deliver.

“The plant is in close proximity to the Raputi community which is

dependent on the local farming community for employment.

“The plant will provide work for 600 people during the construction

phase and 170 people during operation,” Weavind said.

This venture followed an exclusive agreement between Wiphold and

Jidong entered into in June 2007, whereby Wiphold would import and distribute

Jidong/Wiphold- branded cement into South Africa, Tanzania and Angola.



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