Dumisani Ndlela, Staff Reporter
LAFARGE Cement has warned its customers to guard against extortion in a market struggling with poor supplies, over a month after rival Pretoria Portland Cement Zimbabwe (PPC) urged consumers to resist high prices triggered by a shortages of cement.
Lafarge said prices for its 50kg cement bags were within the US$7 to US$8 range, warning that prices above this range were unsanctioned and way above recommended retail prices.
Last year Lafarge had pledged to increase cement output to 90 percent of installed capacity of 450 000 tonnes this year, after initially raising this production last year to 72 percent, from 62 percent in 2008.
Cement manufacturers had significantly suffered a hyperinflationary environment as well as government control on the price of their product, which resulted in a haemorrhage of the construction sector. PPC issued a similar price warning in July, indicating that supplies would normalise with the commissioning of its Bulawayo-based plant.
Supplies however, remain low on the market, forcing dealers to hike cement prices, which ranged between US$12 and US$15, way above recommended retail prices.
A supplier in Tynwald, Harare, said dealers risked bankruptcy if they charged recommended cement prices, alleging the supply situation had resulted in cartels originating from the manufacturers who resold cement to dealers at exorbitant prices.
It was not immediately possible to verify this allegation with suppliers.
PPC Zimbabwe, a Zimbabwe Stock Exchange -listed subsidiary of South Africa’s PPC, was expected to have commissioned its Colleen Bawn kiln plant but had encountered unexplained delays, forcing a shortage of cement products on the domestic market.
PPC Zimbabwe dominates the domestic cement market alongside Lafarge, a subsidiary of Lafarge, the French building materials group. The two command a 90 percent share of the local market, with Chinese-controlled Sino Zimbabwe holding the balance of the market share.
The re-commissioned PPC’s plant will see output increasing 20 percent. PPC had shut down the Colleen Bawn plant to allow for its refurbishment, which resulted in the installation of new machinery.
“We are aware of dealers that are now charging a premium on cement sales. The public are urged to resist these inflated prices as the market will return to normal in the near future,” said PPC.
PPC had acknowledged the supply problems created by the delayed commissioning of its plant, but warned customers to avoid being ripped off by dealers, saying the new plant would be commissioned soon.
The plant was expected to start running in late July in a bid by PPC management to improve supplies on the market.
But it appears there is still a disruption of deliveries to the market due to constraints that could not be immediately established by this newspaper.
In its last report accompanying financial statements for the interim period to March 31 2010, PPC had indicated that it would significantly slow down on planned capital projects because of lower demand. However, the group said it would continue to seek expansion beyond South Africa, Zimbabwe and Botswana.
“The strategy to expand the business beyond its existing geographical boundaries will continue to receive significant management attention,” PPC said.
The company said cement volumes in the six months to March 31 fell eight percent despite surging demand on the Zimbabwean market, which had trebled during the period.
The Financial Gazette understands, however, that all three cement manufacturers are still battling production constraints but are nonetheless buoyant due to stability in the local economy, brought about by the adoption of a multicurrency regime last year and the ditching of a domestic currency that thatgrossly suffered from hyperinflation.
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