Harare – Regional cement manufacturer Pretoria Portland Cement (PPC), says its Zimbabwe unit is focusing on local procurement, with 90 percent of input costs being sourced locally, an initiative which if successfully implemented will provide opportunities for local businesses.
The move is a risk aversion and management coming following Zimbabwe’s protracted cash and forex crisis which has deterred new flows of foreign capital and caused severe bottlenecks in production due to inadequate imported raw materials. PPC recently said 80% of their cash resources are locked in Zimbabwe.
In an operational update for the 9 months to December 2018, the company said implementing this measure among others will help address impact of inflation and liquidity constraints on the business and on the broader PPC Group.
“PPC Zimbabwe management is implementing a number of initiatives to mitigate the impact of inflation and liquidity constraints on the business and on the broader PPC Group.”
These measures in addition to local procurement, includes increasing exports to neighbouring countries, continuing clinker imports from South Africa and share buy-back of PPC shares listed on the ZSE through subsidiary PPC Zimbabwe Ltd.
In the period under review, the Group reported that volumes grew by “low” single digits compared to the prior year for the same period, due to operational challenges experienced in the third quarter of the financial year.
The Group said they remain positive about its operational strength and customer support brand despite the challenging trading environment.
PPC Zimbabwe has been thriving in the face of difficult trading environment in which the economy continued to face severe liquidity constraints, with very low foreign currency reserves impeding payments for offshore goods and services. The Group managed to record new sales records in the previous year ended March 31, 2018, registering a 40% growth in sales volumes.
The manufacturing sector has broadly bemoaned liquidity challenges resulting in the failure to import essential raw material for production. Some have already succumbed to these challenges, notably the recent announcement by cooking oil manufacturer, Surface Wilmar closing its operations.
In as much as it is commendable for companies to take the local procurement route, the viability of it is a source of concern given the magnitude of the collapsing macro environment.
In Zimbabwe, PPC operates three plants including the $82 million plant in Harare which was commissioned in 2017 and produces 700 000 tonnes of cement per annum.
The other two plants are in Bulawayo and Colleen Bawn near Gwanda, with combined annual production of 700 000 tonnes, bringing the total annual production of the company to 1,4 million tonnes per year.
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