Cement shortages signal building boom
CEMENT shortages are bad, right? Not necessarily.
For Zimbabwe, the suddent spike in demand for cement, which has resulted in some retailers rationing sales and hiking prices, are signs of a construction industry on a welcome rebound.
Government is a big buyer because of its new infrastructure projects, while commercial entitites are also investing in expanding operations. Demand for residential houses is another cause.
Zimbabweans tend to build in the dry season, and with farmers feeling flush after a successful season, there is a rush to complete construction of houses before the rains come.
The boom is good news for Zimbabwe Stock Exchange-listed property and construction counters, like PPC, Masimba, Willdale and Lafarge.
A snap survey by The Sunday Mail Society in Harare last week showed some hardware shops restricting the amount of cement a buyer could take, while others had increased the price of a 50kg bag from $10,25 to $14.
A PPC official who spoke on condition of anonymity said, “Generally the shortage can be attributed to the current dry season, where a lot of construction takes place as people want to beat the onset of the rainy season.
“It is also important to note that we are just coming out of the harvesting season and most people might be using the returns from their harvests for construction. Generally, it must be appreciated that we are undergoing a construction boom.”
According to PPC Zimbabwe’s 2018 financial statement, the company’s sales volumes rose significantly due to the upsurge in construction.
“Despite the difficult trading environment, PPC Zimbabwe grew volumes over 40 percent from last year, setting new sales records,” reads a financial report on the company’s website.
“A successful tobacco, cotton and grain harvest injected additional disposable income into the economy, and a late rainy season extended the period of construction activity.
“There was also an upsurge in construction as citizens converted monetary investments to property amid liquidity constraints.”
PPC commissioned a new $82 million plant in Harare, which is expected to take the cement makers capacity to 1,4 million tonnes annually while allowing the company to increase exports to the region.
By the time of going to print, Larfarge Cement Company had not responded to our questions.
Listed brick-making firm Willdale Limited’s sales volumes in the first five months of 2018 were 13 percent above the same period the prior year.
At the firm’s AGM, Lafarge CEO Mr Nyasha Matonda said average prices increased 47 percent compared to the prior year due to market forces.
He said there was anticipation that production and sales volumes were set to further improve, underpinned by the anticipated increased demand for bricks driven by individual residential developments, construction of schools and university accommodation.
Masimba Holdings, another construction company, recorded after tax profit of $698 738 in the period to December 2017, up from $507 055 after registering 43 percent turnover growth to $27,5 million; largely driven by mining and housing developments.
The company is looking at spending $3 million in 2018 to support the current order book.
The order book, which is confirmed and active, is valued at about $40 million.
Following years of non-activity in construction due to economic challenges which the rocked the country over the last two decades, the sector is on the recovery path.
The upsurge in Zimbabwe‘s construction industry has largely been triggered by the recovering economy as well as the influx of international investors.
China is one of the countries that has been investing in the construction industry especially in energy, water and the education sector.
International research institution BMI’s latest forecast says Zimbabwe’s construction industry will grow by 4,3 percent annually from 2017 to 2023 on the back of Chinese investments.
Economist Dr Gift Mugano said there was need for both Government and the private sector to plan and prepare for an upsurge in the construction industry.
“There is bound to be a reaction domestically, regionally and even internationally since we are now in the Second Republic,” he said.
“Since we have been saying Zimbabwe is open for business and we have received significant investment, there has been a lot of construction that has been going on in the country. It is now time for Government and the private sector to invest in this industry. For example what PPC did by opening a new plant.”