ARM Cement prepares to open S African plant

An employee of ARM Cement packages cement at the firm’s Athi River plant. FILE

By VICTOR JUMA,

IN SUMMARY
ARM Cement to build plant through subsidiary with estimated capacity of 3,000 tonnes per day.
The plant will be funded by part of Sh25.5 billion that the company will raise over the next five years through a mix of debt, bank loans and rights issues.

   
ARM Cement is preparing to build a cement plant in South Africa through its dormant subsidiary, turning the tide of investment flows in Africa.

Chief executive Pradeep Paunrana told the Business Daily that the subsidiary will have an estimated capacity of 3,000 tonnes per day when it starts operations in the medium term.

The plant will be funded by part of $300 million (Sh25.5 billion) that the company will raise over the next five years through a mix of debt, bank loans and rights issues.

This will see the Nairobi bourse listed firm join investment firm TransCentury among the few East African firms with operations in South Africa.

ARM Cement’s move will go against the flow of investments in the region which is used to South Africa companies either setting up operations from scratch in Kenya or buying local companies with an eye on gaining a toe-hold into the East African market.

“We have plans to produce cement in South Africa through the subsidiary (Mafeking Cement) that has been dormant,” Mr Paunrana said.

ARM Cement owns 70 per cent of the subsidiary, with the remaining 30 per cent held by South Africans under the Black Economic Empowerment (BEE) policy.

BEE is a set of affirmative action laws brought in after the apartheid regime to redress inequalities of disadvantaged groups, especially the majority blacks, through employment preference, preferential procurement and ownership.

ARM Cement’s move to activate Mafeking Cement will expand the firm’s presence in South Africa. Its subsidiary, ARMSA (Pty) Limited, already manufactures silicate liquid which is used in the mining, construction, and detergent sectors.

The firm is looking to cut reliance on the Kenyan market as it spreads wings to South Africa, Rwanda and Tanzania where it’s on course to complete a 1.2 million tonne plant by June. Kenya generates 90 per cent of its sales.

Opportunities

East Africa nations of Tanzania, Uganda, Rwanda and the restive South Sudan have been the focus of local companies seeking business opportunities in other fast-growing pan-African markets.

In 2010 TransCentury made a bold acquisition of Kewberg Cables & Braids, located in Johannesburg and a leading manufacturer of instrumentation and control cables for the oil and gas, mining and power sectors.

Kenya has been used to South Africa giants like MTN, Tiger Bands and Woolworths making deals locally. The country has one of the highest per capita consumption of cement on the continent at 222kg, ahead of Nigeria’s 108kg, Kenya’s 92kg, and Rwanda’s 34kg, according to ARM.

South Africa-based cement plants sell their commodities across the region including neighbouring economies such as Botswana and Zimbabwe.