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Jun 21, 2007:
A new deal with a Singapore-based cement exporter is set to ease SA's cement shortages.
Coessa Holdings, the Athlone-based company most widely known for the most spectacular addition to the skyline of the City of Cape Town's CBD – the R390m residential, commercial and retail lifestyle centre, Icon, is set to ease the country's cement shortage through an agreement with Singapore-based cement exporter Evermont International. Adam Essa, co-Director of Coessa: "We have come to an agreement with Lim Hong Siang, the Managing Director of Evermont International, to distribute Conch Cement in the Western Cape."
This deal was brokered by Shwu-Ing Liou, Managing Director of L&T Trading Company, who has lived in South Africa for over 40 years but has strong links with Evermont which stretch back to when he was classmates with its Chairman, David Shentu, C.W. Says Liou: "Long-term relationships are important to us. We believe in doing business with friendship. We respect Coessa and their abilities and networks, and we have set up a transparent arrangement based on trust and respect. We will work closely together to bring Conch Cement to South Africa."
Says Essa: "This model works on the basis that it is a good business prospect – but it also relies on relationships which have been established. We will be rolling out the distribution of Conch Cement in the Western Cape with Mr Liou as the representative of Evermont. It is a logical involvement for us. Coessa's subsidiary company is a construction company – and for that we need cement. We all understand the shortage – which is only going to get worse as we near 2010. There are a lot of people around us with the same issues. If we can contribute by bringing in cement at the right price, it helps not only ourselves but other constructors also.
"The fact that we are bringing cement in alleviates pressure on contractors who are trying to deliver on a budget, because the cement prices in South Africa are going up on a weekly and monthly basis owing to the shortage and demand. Right now, cement is close to R50 a 50 kg bag. Last year this time it was R36 a bag."
Lim says that Evermont became aware that South Africa would be facing a shortage in cement in 2006. "We obtained two certificates of SABS accreditation for Conch Cement produced by two of the Conch Cement factories in China in May 2006. Conch is ranked the number three cement producer in the world, with a production capacity this year of 100 million tons.
"The shortage of cement in South Africa is conservatively calculated to be about 5 million tons a year. The four big companies in South Africa are currently producing about 13-14 million tons a year. According to statistics, total usage is set to be around 20 million tons this year."
Says Essa: "If we are looking at a 5 million ton shortage a year, this is very significant, since South Africa is only producing 15 million tons in total. That means we have about a 30% shortage per annum at this stage."
The deal between Evermont and Coessa comes after a recent history in South Africa of intermediaries trying to get on board with Evermont or saying that they were Conch agents and dealers when they were not. Says Essa: "The market has been deluged by a lot of operators that claim to have cement at various prices. We were approached last year before I spoke to Mr Liang by various parties offering me cement at unrealistic prices. Luckily I did not put any money down. This is the biggest problem with the cement- importing business at the moment - there are all these people that create this false sense of pricing and of their ability to deliver – and they never can deliver."
Lim sets the record straight: "Evermont International is the only representative of Evermont and Conch in South Africa, together with Coessa and Mr Liou in the Western Cape. The first loads have now been landed in South Africa through Durban – 18,000 tons in March, 24,000 tons in May, and another 17,500 tons at the end of May/early June. My buyers for these are a UK-based company, ICC UK Ltd, and Sascrete Brick - a brick making company in Sasolburg."
What manufacturing capacity of Conch can Evermont spare for South Africa? Lim has the final words: "As much as can be sold here. The sky is the limit."
