ZCCM IH’s impresario, Dr Pius Kasolo, has made no secret of the fact that he wants to grow his investment company’s group portfolio. That is why the press team at Financial Insight were not surprised when the invitation came for the attendance to the signing ceremony of the Financing Agreement Contract (FAC) at their office park boardroom.
The FAC comes after the signing of the engineering and procurement contract (EPC) which was signed earlier in the year which signaled ZCCM IH’s intent to seek cement as part of its portfolio in July this year.
Engineering, Procurement and Construction (EPC) is a particular form of contracting arrangement used in some industries where the EPC contractor is made responsible for all the activities from design, procurement, construction, commissioning and handover of the project to the end-user or owner. This is the mechanism astute company’s use when they would like to focus on their core business but also seek to scale up their investments.
All of these arrangements are coming under the special purpose vehicle (SPV), Central African Cement Company Limited (CAC). CAC is currently owned by ZCCM-IH and SINOCONST. The latter shareholder of this SPV is a Chinese company that is specialized in construction of large scale industries with cement being one of them.
The FAC that was signed on 4th December 2018 is basically a loan agreement which is the contract between a borrower (SPV CAC) and a lender (CBMI SINOMA) which regulates the mutual promises made by each party. In this particular case, CBMI SINOMA are not only the lender of the capital but also the EPC contractor as well. This is a structure that has become ubiquitous with project oriented companies from China.
In 2017 July Reuters published that project would cost an estimated US$548 to build the cement plant in Ndola. The cement production would be estimated at 5000t per day and would use two 20MW captive coal-power plants.
With ZCCM IH entering the cement game, oligopoly will now become the game play for the cement industries with extant players in Lafarge Plc, Dangote Industries, Zambezi Portland, and Sinoma. With the construction agenda being pursued by the Government, entering the cement game now will create an interesting dynamic. The question will be, will ZCCM IH’s investment be a cement only offering or they will camouflage like the way Sinoma entered the game.
For shareholders in the company, this investments confirms investment in the company is for the long term. The company recently published 2018 financial year results which indicate that the group reported a profit of K975 million (2017: 729 million) representing a 33% increase. With only the impasse of Ndola Lime lurking a dark shadow, Pius is determined to weather the storm like all forward thinking CEO’s should.