Infrastructure craze to bolster Africa's cement industry growth

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© 2013 Frost & Sullivan. All rights reserved. This document contains confidential information

and is the sole property of Frost & Sullivan.

Strategic Outlook of sub-Saharan

Africa’s Cement Industry

Manufacturing Unit

November, 2013

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Contents

Sub-Saharan Africa’s Cement Industry 2

Sub-Saharan African Cement Industry’s Mega Trends 6

Sub-Saharan African Cement Industry Forecasts 12

Key Conclusions 16

Appendix I: Who is Frost & Sullivan? 18

Appendix II: Manufacturing Unit Scope & Coverage 21

Contacts 24

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Country Scope – West Africa, Southern Africa and East AfricaFrost & Sullivan has conducted exhaustive cement industry research within Africa’s key

cement producing economies

EAST AFRICA

NORTH AFRICA

1) Egypt

1) Kenya

2) Uganda

3) Tanzania

4) Rwanda

5) Burundi

SOUTHERN AFRICA

1) South Africa

2) Zimbabwe

3) Zambia

4) Botswana

5) Lesotho

6) Namibia

7) Swaziland

WEST AFRICA

1) Nigeria

2) Ghana

3) Togo

4) Benin

5) Mauritania

6) Ivory Coast

7) Sierra Leone

8) Guinea

9) Burkina Faso

10) Liberia

11) Niger

OTHER COUNTRIES

1) Countries where in-depth

cement industry has not been

conducted thus far

For the purposes of this

presentation, Frost & Sullivan selected

the top three cement producing

economies within Southern, East & West

Africa

4

Sub-Saharan Africa’s Cement IndustryWest Africa’s cement industry has witnessed strong output growth driven by the Dangote

Cement Group’s aggressive local and regional expansion initiatives

West Africa47%

East Africa21%

Southern Africa32%

*SOUTHERN AFRICA

(2012 base year information)

South Africa 13.1 Mt

Zimbabwe 1.5 Mt

Zambia 1.4 Mt

TOTAL 15.9 Mt

* WEST AFRICA


Nigeria 18.5 Mt

Ghana 3.3 Mt

Benin 1.1 Mt

TOTAL 22.9 Mt

*EAST AFRICA


Kenya 4.3 Mt

Tanzania 3.6 Mt

Uganda 2.2 Mt

TOTAL 10.1 Mt

2012 Output = 48.9 Mt

COMMON THEMES ACROSS THE PROFILED REGIONS

1) Leading cement producers are ramping up capacity

2) Top two (2) cement producing countries within each of the

profiled regions plan to export more over the next 10

years

3) Local cement producers impacted by lower priced Asian

imports

Cement Industry: Supply in Million Tons (Sub-Saharan Africa), 2012

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Sub-Saharan Africa’s Cement IndustryRapid urbanisation, industrialisation and the need to expand economic infrastructure are key

factors that have contributed to growth of sub-Saharan Africa’s cement industry

Cement Industry: Market Dynamics (Sub-Saharan Africa), 2012 – 2018

Political

stability

Higher

demand for

housing

Potential to

export into

the rest of

the continent

Rapid

urbanisation &

industrialisation

Infrastructure

expansion

Increasing

per capita

cement

consumption

Risk of

oversupply

Increasing

operating

costs

Electricity

shortages

Limited

limestone

deposits

Profit

margin

pressures

Rising merger

& acquisition

risk

Influx of lower

priced Asian

imports

Price sensitive

customer base

Stricter

environmental

legislation on

carbon

emissions

Ageing

production

infrastructure

Increasing

distribution

costs

INDUSTRY CHALLENGESMARKET DRIVERS

MARKET RESTRAINTS

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Contents




Key Conclusions 16



Contacts 24

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Top 4 Mega Trends Impacting sub-Saharan Africa’s cement industryFuture infrastructure & urbanisation will sustain the long-term growth of the region’s cement

industry

Urbanisation

Regional

Integration

New Business

Models

Future

Infrastructure

Source: Frost & Sullivan analysis.Photo Credits: Dreamstime

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Source: Africa Progress Report, 2010;

Frost & Sullivan analysis.Migration Urban Population, 2025

City with population > 5.0

million, 2025

Dakar4.3 million

6.3 million

3.8 million3.2 million

6.2 million

Algiers

Dares Salaam

Alexandria

Nairobi

Casablanca

Accra

Abidjan

Addis

Ababa

Ibadan

Douala

Cape TownDurban

5.6 million

3.6 million

4.1 million

3.2 million

3.1 million

4.7 million

6.2 million

3.5 million

Luanda8.0 million

Johannesburg/

Pretoria/

Ekurhuleni

8.0 million

Urban Populations, Africa, 2025

Regions with Key Cities

Top Mega Trends in Africa: UrbanisationWith an Annual Average Growth of 3.4%, Population in Several Sub-Saharan African Cities

Will Rise by 25% by 2025. By 2050, 60% of Africa’s Population Will be Urbanised

0

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

1995 2000 2005 2010 2015 2020 2025

Eastern Africa Middle Africa Northern Africa

Southern Africa Western Africa

Urb

an

Po

pu

lati

on

(‘0

00)

Urban Population Forecast by Region, 1995-2025

9

< 0.5

0.5 – 1.0

1.0 – 5.0

5.0 – 10.0

0.0 – 15.0

>15.0

Legend:

Investment ($ billion)

Transport

$174 billion

• High value

investments (>$1

billion)

• Focus on road, rail

and port networks

Energy

$139 billion

• Historical reliance on

thermal/hydropower

• Increased focus on

driving renewables

*based on active projects in 2012

Source: Frost and Sullivan analysis

Total investment in

ongoing infrastructure

projects in Sub-Saharan

Africa (excluding ICT &

Telecoms) amounts to

$378 billion

Water

$20 billionSocial

$45 billion

• Secondary

Focus for Govts

• Could pose

major risk in

medium/long-

term

• Driven by

Millenium

Development

Goals

• High reliance on

Development

Aid

Top Mega Trends in Africa: Future InfrastructureAbout 810 Billion USD of spending is needed over the next five years to upgrade, rehabilitate

and expand Africa’s infrastructure

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Top Mega Trends in Africa: Regional IntegrationCorridors Will Unlock Economic Potential of Landlocked Countries; Freight Movement Through

Road Set to be a Key Economic Driver Across the Continent

Current road

corridors

KEY:

12

3 4

4

3

9

8

6

7

5

Proposed/unpaved

road corridors

4: Cairo-Gabarone-Cape Town

Reaching completion in the Southern half (which

is alternatively a Southern – Eastern African link

known as the ‘North South corridor’. However

the North half of the corridor remains largely

impassable.

1: Cairo – Dakar

Substantially complete, although

the border between Algeria and

Morocco is closed

95%Percentage

Completion

95%

3: Tripoli-Windhoek-Cape Town

Largely incomplete with major

sections missing in Northern and

Central Africa and Angola

20%

40%

5: Dakar-Ndjamena

Mostly complete, with

some road paving still

required in the central

portion. However the

area is also currently

considered to be a high

security risk zone

85%

6: Ndjamena-Djibouti

largely still at the feasibility stage, and

requires considerable investment in the

rehabilitation of the central portions

40%

2: Algiers-Lagos

Algiers-Lagos is also substantially complete (there

is a 200km unpaved desert section) > in addition

security risks are high

85%

7: Dakar-Lagos

Substantially complete, with

some portions of the link still

requiring paving

85%

Proposed Trans-African Road Corridors, 2012

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`

Mega

Consumption$1.4 Trillion

Rise of African

urban consumer

will continue to fuel

growth

Radical Returns

Investors awake to

sustainable growth

opportunities

Unshackling

Governance

Political Revolution

will make Africa

stronger

Powerful

purchasing

Discretionary income

will rise by 50% over

the next decade

Intelligent

replenishment

Bringing home both

financial and human

capital

Top Mega Trends in Africa: New Business ModelsDiscretionary income will rise by 50% by 2020

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Contents




Key Conclusions 16



Contacts 24

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63%

22%

15%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2018

Dem

an

d (

Millio

n t

on

s)

Southern Africa

East Africa

West Africa

18.0

12.5

3.8 3.7 3.2 2.2 1.8 1.2 1.10.0

5.0

10.0

15.0

20.0

Dem

an

d (

Millio

n t

on

s)

63%

22%

15%

0.0

10.0

20.0

30.0

40.0

50.0

2012

Dem

an

d (

Mil

lio

n t

on

s)

Southern Africa

East Africa

West Africa

Sub-Saharan Africa’s Cement Industry Assuming a stable economic environment the profiled countries’ cement output is expected to

increase by more than 30 million tons during the forecast period

47%

21%

32%

0.0

10.0

20.0

30.0

40.0

50.0

2012

Ou

tpu

t (M

illio

n t

on

s)

Southern Africa

East Africa

West Africa

18.5

13.1

4.3 3.6 3.3 2.2 1.5 1.4 1.10.0

5.0

10.0

15.0

20.0

60%

17%

23%

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2018

Ou

tpu

t (M

illio

n t

on

s)

Southern Africa

East Africa

West Africa

48.9 85.2

40.962.9

2012 Country Output in Million tons

CEMENT INDUSTRY OUTPUT FORECASTS (SUB-SAHARAN AFRICA), 2012 – 2018: CAGR 9.7%

CEMENT INDUSTRY DEMAND FORECASTS (SUB-SAHARAN AFRICA), 2012 – 2018: CAGR 7.5%

2012 Country Demand in Million tons

14

10.1

11.211.7

12.7 12.813.3

14.6

0

2

4

6

8

10

12

14

16

2012 2013 2014 2015 2016 2017 2018

Su

pp

ly (

Mil

lio

n t

on

s)

Year

22.926.7

38.942.2

44.547.2

51.5

0

10

20

30

40

50

60

2012 2013 2014 2015 2016 2017 2018

Su

pp

ly (

Mil

lio

n t

on

s)

Year

15.9 16.016.9

17.718.3 18.8 19.1

0

5

10

15

20

2012 2013 2014 2015 2016 2017 2018

Su

pp

ly (

Mil

lio

n t

on

s)

Year

48.954.0

67.572.6 75.6 79.3

85.2

0

20

40

60

80

100

2012 2013 2014 2015 2016 2017 2018

Su

pp

ly (

Mil

lio

n t

on

s)

Year

Cement Industry: Supply Forecasts (East Africa), 2012 – 2018

Source: Frost & Sullivan


Cement Industry: Supply Forecasts (West Africa), 2012 - 2018Cement Industry: Supply Forecasts (sub-Saharan Africa), 2012 – 2018

Cement Industry: Supply Forecasts (Southern Africa), 2012 – 2018


Regional cement supply is forecast to grow at a CAGR of 9.7% during

the years 2012 - 2018

West African cement industry supply forecast CAGR (2012 – 2018) =

14.5%


Southern Africa cement industry supply forecasts CAGR (2012 – 2018)

= 3.1%

East Africa cement industry supply forecasts CAGR (2012 – 2018) =

6.4%

Sub-Saharan Africa’s Cement Industry When compared to the other region’s, West Africa is expected to witness the largest output

growth during the forecast, followed by East Africa and Southern Africa

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Sub-Saharan Africa’s Cement Industry Key expansion initiatives by the sector’s key industry participants over the next few years

COMPANYPRODUCTION CAPACITY

(Million tons)EXPANSION INITIATIVES 2011 – 2018 EXPENDITURE

WEST AFRICA: NIGERIA

Dangote Cement Group 19.8 Mt (8 plants) Yes (in-country & sub-region)USD 7.25 billion

(16.2 Mt expansion)

Lafarge WAPCO 4.4 Mt (3 plants) Yes (in-country)USD 800 – 900 million

(3.1 Mt expansion)

Ashaka Cement 1.2 Mt (1 plant) Yes (in-country)USD 700 million – 800 million

(1.0 Mt expansion)

Cement Company of Northern Nigeria

(CCNN)0.5 Mt (1 plant) Yes (in-country)

USD 170 – 200 million

(0.5 Mt expansion)

United Cement Company of Nigeria

Limited (UNICEM)2.5 Mt (1 plant) Yes (in-country)

USD 150 – 200 million

(0.5 Mt expansion)

SOUTHERN AFRICA: SOUTH AFRICA

Pretoria Portland Cement 6.9 Mt (8 plants) Yes (in-country & sub-region)USD 7.5 billion (0.6 Mt & regional

expansion initiatives)

Lafarge South Africa 3.6 Mt (3 plants) Yes (in-country & sub-region) Did not provide

NPC Cimpor 1.6 Mt (3 plants) Yes (in-country) Did not provide

AfriSam 4.8 Mt (2 plants) Yes (in-country & sub-region)USD 2 – 3 billion (1.2 Mt & regional

acquisitions)

EAST AFRICA: KENYA

East African Portland Cement 1.4 Mt (1 plant) Yes (in-country)Did not provide (to add new clinker

capacity)

Mombasa Cement 1.0 Mt (1 plant) Yes (in-country) USD 5 – 10 million (0.5 Mt expansion)

National Cement 1.0 Mt (1 plant) Yes (in-country) USD 120 150 million (1.5 Mt

expansion)

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Contents




Key Conclusions 16



Contacts 24

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Key ConclusionInvestment to expand and upgrade existing infrastructure to support cement sector growth over the next

few years

Rapid urbanisation will

contribute to robust growth of

sub-Saharan Africa’s cement

industry

Future infrastructure

development to also drive the

sub-region’s cement demand

growth

Per capita cement consumption

is expected to trend upwards

driven by an anticipated rise in

the regional populace’s HCE

Sustained economic growth and

sound fiscal and monetary

policies will also contribute to

sustained long-term growth of

the cement sector

Regional governments are

committed to plugging the

sub-continent’s housing

gap, which will boost cement

consumption

Co

nc

lus

ion

s

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Contents




Key Conclusions 16



Contacts 24

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Appendix I

Who is Frost & Sullivan?

• Founded in 1961

• Offer the exclusive Growth System including:

• Growth Consulting and Growth Implementation

Services

• TEAM Research & Reports, Custom Research

• Over 2,000 Consultants & Analysts across 40+global

locations

• 10,000+ clients worldwide including emerging companies, the

global 1000, and the investment community

• African office based in Cape Town

• Staff compliment of 70+ exclusively focused on the African

markets

How We Support You

Megatrend and impact analysis on your business

Growth and New Business Oppurtunity Assessments

Business Plan & Change Management

Implementation and Mid -Top Management Training

Expansion and Partnership Selection Strategy

Competitive Environment Analysis

20

Appendix I

Our Industry Coverage

Automotive&

Transportation

Aerospace & Defense Measurement &Instrumentation

Information &Communication Technologies

HealthcareEnvironment & BuildingTechnologies

Energy & PowerSystems

Chemicals, Materials& Food Manufacturing

Industrial Automation& Process Control

AutomotiveTransportation & Logistics

ConsumerTechnologies

Minerals & Mining

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Contents




Key Conclusions 16



Contacts 24

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Manufacturing Production & Investment Forecasts

Appendix II

Coverage & ScopeFrost & Sullivan’s manufacturing sector scope within sub-Saharan Africa

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Zimbabwe

• Mining & Manufacturing

Industry

South Africa

• Steel industry

• Power Industry

• Food Industry

• Beverages Industry

• Chemicals & Petrochemicals

Industry

• Liquid Fuels Industry

• Pulp & Paper Industry

West Africa

• Cement industry

North Africa

• Steel Industry

East Africa

• Beverages Industry Egypt

• Cement industry

Southern Africa

• Cement Industry

Completed ME studies

Planned ME studies

Appendix II

Research TitlesList of Frost & Sullivan’s manufacturing intelligence titles within sub-Saharan Africa

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For further information please contact:

James Fungai Maposa

Consulting Manager – Industrial

Tel: 0027 21 680 3203

E-mail: [email protected]

Guillaume de Bassompierre

Director of Business Development – Africa

Tel: 0027 21 680 3582

Mobile: 0027 71 684 0011

Email: [email protected]

Infrastructure craze to bolster Africa's cement industry growth

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