This week, ICR learned that the Namibian cement market was in the process of change with Schwenk Zement's 0.7Mta Ohorongo plant now expected to come under control of International Cement Group (ICG), a Singapore-based company owned by Compact Metal Industrial Plc.
ICG aims to acquire 69.83 per cent in Ohorongo Cement, subject to approval by the competition authorities. The remaining 30.17 per cent of shares are held by the Development Bank of Namibia and other South African shareholders. The acquisition could be approved as soon as 31 July 2019.
The German company's decision to leave the Namibian market may seem surprising at first, but the start-up of the 1.2Mta Chinese-backed Whale Rock Cement plant (Cheetah Cement brand), commissioned by Sinoma Tianjin Cement Industry Design & Research Institute Co Ltd of China last April, has changed the dynamics of Namibia's cement market.
Namibia's oversupply problem
Namibia's 0.6Mta cement market is hugely oversupplied since the entry of Whale Rock Cement, which together with imports have seen cement supply rise to around 2.5Mta, according to Ohorongo Cement's Managing Director, Hans-Wilhelm Schütte.
Meanwhile, demand has been under pressure: "Ohorongo sales volumes have been under pressure by the current state of the construction industry in Namibia since 2017," said Frankleen Alberts, Ohorongo Cement's customer relations and public affairs official. "Also for 2019, a continued downward trend of the industry is expected, mainly driven by the lack of construction projects in the public and private sectors."
Building a local industry for Namibians
In spite of sufficient local capacity, Whale Rock Cement has been criticised for importing large volumes of clinker from Egypt and China, rather than creating a value chain in Namibia and more jobs for the local population.
By comparison, Schwenk Zement has been proactive in supporting Namibians in the work place and in July 2018 Ohorongo Cement secured a contract with Kaptau Packaging for locally-produced cement bags. The company has been supplying 10,000 bags/day to the plant in Oshakati and employs 25 staff. The aim has been to integrate local Namibians into the industry.
Ohorongo Cement also appointed Estelle Alberts as plant manager in 2017, the first Namibian to hold the post. "It has always been the Schwenk family's intention to one day hand over the plant operations to Namibians," said Gerhard Hirth, who heads the Ohorongo Cement company board.
Schwenk Zement has tried to protect its workforce against foreign imports. It has provided local jobs and produced its own clinker as well as ground cement at its Ohorongo plant rather than import. However, Schwenk Zement's Infancy Industry Protection (IIP) period was challenged in the High Court by cement importers and the company's cement volumes have been gradually falling ever since.
Commenting on the entry of Whale Rock Cement, last July, Mr Schütte also expressed concern about what this could mean for Namibia's cement sector with job losses. "We have a 100 per cent Namibian workforce here. We also have a lot of downstream and upstream activities. Cement bags are now produced locally at Kaptau Packaging in Oshakati and all of that is at risk because if our volumes go down their volumes will also go down," said Mr Schütte
"We still need a lot of infrastructure, we need roads, bridges and airports, but my message to Namibia is that, we could have used the money for something else, whether it’s in the energy sector or anywhere else as long as it is on the interest of the country, because we are now sitting with an overcapacity," he added.
In April 2018 Mr Schütte declared that the company was looking at export markets such as Angola and Botswana but said that it could not compete. "We looked at west and east Africa and Egypt, and in terms of international markets, we cannot compete immediately," Mr Schütte added.
Beumer supplied the third packaging line at Ohorongo Cement
New owners to inherit state-of-the-art facility
Inspite of market conditions, ICG will inherit a world class facility, built by ThyssenKrupp in 2010 with finance from the European Investment Bank, which lent EUR82m towards the EUR250m project.
The Ohorongo plant is renowned for its use of biofuel and RDF, which provide 80 per cent of the plant's energy needs. It also operates a 5MW solar power plant, which opened in 2018.
Schwenk Zement looks to Europe
Meanwhile, last month Schwenk Group signed an agreement to acquire Cemex's Broceni cement plant in Latvia, along with the Akmenes Cementas plant in Lithuania, plus four aggregate quarries, six ready-mix plants and a land distribution terminal in the Nordic/Baltic region of Europe. The group's core emphasis is being placed in Europe, with its headquarters in Germany.