Cementing a place in Africa: PPC’s internationalisation drive

Abstract

Learning outcomes
The study enables students to critique the internationalisation strategy of an African business including elements of macroeconomic analysis, company fit with jurisdictions, non-market strategies and mode of entry.

Case overview/synopsis
Roland van Wijnen was the chief executive officer of Pretoria Portland Cement Company Limited (PPC), a 130-year-old cement maker based in South Africa. He joined after the business had embarked on an international expansion strategy that had taken the business to countries of Rwanda, the Democratic Republic of the Congo and Ethiopia in a matter of years. This expansion caused the deflation of the Johannesburg-listed company’s share price. The company failed to appreciate a number of success factors in each jurisdiction. The challenges included cultural misalignments, macroeconomic analysis and mode of market entry. The case dilemma involved the choices that van Wijnen faced in re-evaluating the international footprint of the business.

Complexity academic level
Undergraduate or postgraduate level.

Supplementary material
Teaching notes are available for educators only.

Subject code
CSS 5: International business.

Full text

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PPCCASESTUDY:
CEMENTINGAPLACEINAFRICA:PPC’sINTERNATIONALISATIONDRIVE
IanMacleod,AdrianDavidSaville*andTheresaOnaji‐Benson
GordonInstituteofBusinessScience,UniversityofPretoria,Johannesburg,SouthAfrica
Correspondingauthor:AdrianDavidSavillecanbecontactedat:savillea@gibs.co.za
Casesummary
Learning outcomes: The study enables students to critiquethe internationalisation strategy of an
Africanbusinessincludingelementsofmacroeconomicanalysis,companyfitwithjurisdictions,non‐
marketstrategiesandmodeofentry.
Case overview/synopsis: Roland van Wijnen was the chief executive officer of Pretoria Portland
CementCompanyLimited(PPC),a130‐year‐oldcementmakerbasedinSouthAfrica.Hejoinedafter
thebusiness hadembarked onan international expansion strategy that hadtaken thebusiness to
countriesofRwanda,theDemocratic Republic of the Congo andEthiopiainamatterofyears.This
expansioncausedthedeflationoftheJohannesburg‐listedcompany’sshareprice.Thecompanyfailed
to appreciate a number of success factors in each jurisdiction. The challenges included cultural
misalignments,macroeconomicanalysis andmodeof market entry.Thecasedilemmainvolvedthe
choicesthatvanWijnenfacedinre‐evaluatingtheinternationalfootprintofthebusiness.
Complexityacademiclevel:Undergraduateorpostgraduatelevel.
Supplementarymaterial:Teachingnotesareavailableforeducatorsonly.
Subjectcode:CSS5:Internationalbusiness.
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Theauthorswrotethiscasesolelytoprovidematerialforclassdiscussion.Theauthorsdonottointend
toillustrateeithereffectiveorineffectivehandlingofamanagerialsituation.Theauthorsmayhave
disguisedcertainnamesandotheridentifyinginformationtoprotectconfidentiality.
Version: 2023-09-21
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RolandvanWijnen,theCEOofPPC,wasonsafariattheendof2021inSouthAfrica’sKrugerNational
Park,whenhefoundaquietmomenttoreflectonewarmafternoon.Hehadtakenoverthereinsat
PPC,a130‐year‐oldcementmaker,inOctober2019whenthebusinesswasindeeptrouble.Hehad
doneagreatdealtoavertexistentialcrisisandsteeredthecompanythroughtheworstoftheCovid‐
19period.Thisleftthepressingdifficultyoftheaftermathofatroubledinternationalexpansiondrive
andfindingthecapitaltogrow.
Inthespaceofseveralyearsstarting in 2012, PPC had branchedoutfromitsexistingoperationsin
South Africa, Zimbabwe and Botswana, into Ethiopia, Rwanda and the Democratic Republicof the
Congo(DRC) inquicksuccession[see EXHIBIT2].Theyhadcommittedlarge amountsofcapital,but

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shareholdervaluewouldbedecimatedintheyearstocome.Fromsome$2.561pershareinMarchof
2013,thesharepricefellbelow$0.26bythetimeDutchnationalvanWijnentookthereins2.
Heheldnopunchesinhissummaryofthebusiness’sinternationalisationdrive.“Itwasactuallysome
prettycrazystuff.Idon’tthinknearlyenoughhomeworkwasdoneandattimeswepartneredwith
thewrongpeople”.
Tosucceed,PPCneededtoraisecapital[seeEXHIBIT11.WhatwouldvanWijnen’ssalespitchbeto
funders?ShouldPPCretreatfromanyofitspost‐2012markets?Shouldtheyaimtomoveintoother
Africancountriesthatsuititbetter?Andifso,whereshoulditgoandhowshoulditgetthere?
PPCanditsleadershipfacedthedilemmathatsomanyfaceinahighlyglobalisedworld.Specialising
and trading across borders opens up possibilities of tremendous gains. However, it comes with
extraordinarymacroeconomicrisk,cultural and administrativecomplexity,anda seemingly endless
arrayofstrategicdecisionstobemade.
PPC’SHISTORY
PPC’soriginsgobackwelloveracenturyinSouthAfrica.AsDeEersteCementFabriekenBeperkt[in
English, “The First Cement Manufacturer Limited”], they launchedin1892inPretoria.Thename
PretoriaPortland3CementCompanyLimited–or,asitisnowknown,PPC–wasadoptedin1908.The
companylistedontheJohannesburgStockExchangetwoyearslater.
ByJuly2017PPCwasmakingthefullrangeofcementandrelatedproducts that itdoestoday[see
Exhibit3].Thatmeantboththeindividualbagsofcementforretailsale,aswellasthe“readymix”that
isusedonlargeconstructionprojects.Italsoencompassedaggregates,suchascrushedstone,flyash
andlime.Eachofthesehasimportanttechnicalimplicationsforattributeslikedensity,longevityand
strengthofthefinalproduct.PPCalsomovedintoplasterandmortar.
2010wasamarqueeyearforbothPPCandSouthAfrica,asthecountry hosted Africa’s first FIFA
FootballWorldCup.MajorinfrastructureprojectshadincludedtheWorldCupstadia,theGautrain(a
rapidrailtransitsysteminJohannesburgandPretoria),andthenewMedupiandKusilepowerstations.
GDPgrowthwasalsoupto3%afterfallingto‐1.5%in2009inthewakeoftheglobalfinancialcrisis.
Thiswasalsoathreshold year as Njombo Lekula,currentlyManagingDirector for PPC SouthAfrica
andBotswanaexplained, “Themarkethadenjoyed a few goodyears in SouthAfrica.But we knew
muchofthiswoulddryupaftertheWorldCup.”Hecapturedthequestiontheyfacedin2010:“Dowe
stayhereandshrink,ordoweexpandfurtherintothecontinent?”
SUB‐SAHARANAFRICA’SCEMENTINDUSTRY
PPCandvanWijnenfacedaregionwithalowbaseforcementconsumption.Onapercapitaperyear
basis,globalaverageconsumptionwas500kg,comparedtojust91kginsub‐SaharanAfrica4.
Themacroeconomywasacriticalfactor.Beingaquasi‐commodity,thecementindustry’sfortunesare
closelylinkedtogrowthingrossdomesticproduct(GDP)[seeEXHIBIT4]–andevenmoreexplicitlyto

1SouthAfricanrand(ZAR)amountsquotedinUSdollarsasatgivendate.
2AlldollaramountsareUSdollars.
3“Portland”cementisthemostcommonvarietyoftheproductusedaroundtheworld.
4Schmidt,W.,TchetgniaNgassam,InèsL.,Breitschaft,G.,andVirchow,S.(2018).Challengesofthegrowing
Africancementmarket–environmentalissues,regulativeframework,andqualityinfrastructurerequirements.
MATEC,accessed19December2021,https://doi.org/10.1051/matecconf/201814901014
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growthingrossdomesticfixedinvestment(GDFI).Thisis most pronounced inemergingeconomies
suchasthoseofAfricaasmore advancedcountriesbecomemoreservice‐orientedandrelylesson
industrial growth. Despite Africa’s GDP contraction of 2.1% in 2020 at the height of Covid‐19
lockdowns,theWorldBankpredictedgrowthinsub‐SaharanAfricaof3.6%in2022and3.8%in20235
[seeEXHIBIT8].
The number of potential customers was also growing. Sub‐Saharan Africa’s population has been
forecasttoreachdoubleits2019levelsby20506[seeEXHIBIT9].Ifthatcomestopass,theregionwill
makeupaquarteroftheworld’stotal.Morepeoplealsomeanmorehomes,offices,schools,hospital,
hotelsand bridges. One industry studyforecast thatdemand forcementacrosseastAfricawasto
expandatacompoundannualgrowthrate(CAGR)of7.5%during2018‐20237.
Aswithanyindustrythatlendsitselftolargecompanies,oligopolypowercanbedecisiveforsuccess.
High concentrations of market share among small numbers of suppliers throughout the African
cementindustryhavelongmadeforelevatedprices.TheWorldBank has estimated that African
consumers therefore pay $2,5 billion per year more than they would if competition abounded8.
However,thepriceisgraduallymovingtowardspurchasingpowerparity.WhileAfricanspaidmore
forcement thanon anyother continent in 2011,the average price fellbymore than inanyother
continentbetween2011and2017,coincidingwithentryandcapacityinstallation.
One peculiarity of cement consumption in emerging markets, such as those in Africa, lies in the
proportionatedemand persector.While civilengineering consumesthebulkoftheproductinthe
UnitedStates, in Africa there isdisproportionatedependenceon the demand forcement fornew
housing9.So,firmslikePPCareespeciallyinterestedingrowingeconomicprosperitythatdrivesnew
housebuilding,andrenovationsandexpansionstoexistinghomes.
Whilecognizantoftherisksanddifficultiesofdoingbusinessinemergingmarkets,RolandvanWijnen
madehissentimentclearonprospectsinAfricafromthestart.“Thereisendlessopportunity.Ifyou
succeed,therearenearlyunlimitedgainstobemade.Youalsohavetobepreparedtotakeonsome
uniquechallengesandsignificantrisks.”
PPC’sHOMEBASE:SOUTHAFRICA,ZIMBABWE,BOTSWANA
PPC Ltd., the South Africa‐based entity, a lready owned 100% of PPC Zimbabwe when van Wijne n
joinedthebusiness–aswasthecasewithallofitsinternationalpositions.Zimbabwepresentedthe
ongoingproblemofoneoftheworld’smostunstablecurrencies,theZimbabweandollar.Liquidityin
USdollarswasanever‐presentproblemforPPC’slocaloperation,evenafterthelocalcurrencywas

5WorldBank,GlobalEconomicProspects:Sub‐SaharanAfrica,January2022,accessedJanuary7,2022,
https://thedocs.worldbank.org/en/doc/cb15f6d7442eadedf75bb95c4fdec1b3‐0350012022/related/Global‐
Economic‐Prospects‐January‐2022‐Regional‐Overview‐SSA.pdf
6UnitedNations,Worldpopulationprospects2019,Onlineedition,revision1,2019,accessedFebruary42022,
https://population.un.org/wpp/
7ImarcGroup,EastAfricaCementMarket:IndustryTrends,Share,Size,Growth,OpportunityandForecast
2022‐2027,2022,accessed12January2022,
https://www.researchandmarkets.com/research/8jmx46/the_cement_market?w=12
8WorldBank,BreakingDownBarriers:UnlockingAfrica’sPotentialthroughVigorousCompetitionPolicy,27
July2016,accessed14November2021,https://www.worldbank.org/en/news/feature/2016/07/27/africa‐
competition
9Byiers,B.,Karaki,K.,andVanheukelom,J.(2017).Markets,PoliticsandValueChainsNo.216.European
CentreforDevelopmentPolicyManagement.

4
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relaunchedandrebasedinmid‐2019.Nonetheless,withinstalledcapacityof1,4mtpa(milliontonnes
perannum),PPCwasthelargestcementmakerinthecountry.
PPCleadershipcouldflytoHararefromJohannesburginexpensivelyinjust90minutes.Thelanguage
ofbusinessandpoliticsmatchedtheEnglishusedathome.ThetwocountriessharedaparallelBritish
colonialpastaswellasintangibleconnectionssuchassportingrivalries.
VanWijnenhighlightedonefacetofdoingbusinessfarmorestraightforwardin Zimbabwe than in
PPC’shomecountryofSouthAfrica.“TheReserveBankofZimbabweoweus$20million.Ithaslong
beencleartheywouldstruggletopaythistous.Theircurrencycrisisisadeep‐rooted problem, so
theyguardwhateverhardcurrencytheyhaveveryclosely.So,wesatdownwiththeBank’sGovernor
andhadacandidconversation.Wesaid,lookweknowitisdifficultforyoutorepayusrightnow.But
we have an idea. We suggested reasonable ways for them to pay us the money as the US dollars
becameavailable.Theideawaswellreceived.Weavoidedanantagonisticinteractionandweareall
betterforit.”
Inasimilarvein,vanWijnenrecalledanotherinstanceofapositiveexperienceovercomingchallenges
throughinteractionwith official bodies.“Atone stage we facedopposition claimingwelacked the
requisitelicensetoimport.Wespokewiththerelevantministerwhomadethenecessaryphonecalls
toconfirmourdocumentationwasallinorder.Problemsolved.
“Critically, you don’t want to go to government with complaints and demands. You’ve got to
understand their rules and why they are in place.Are theytrying toprotect consumers or are we
lookingatataxtomakemoney?Listentothem.Thatwayyoucan make acompelling case. Maybe
youcanshowthataproposedregulationisgoingtoplaceextracostsonconsumerorevenkilljobs.If
youworktogether,you’vegotabettershotatgoodoutcomesforeveryone.
“ThissortofproductiveteaminghasbeenharderforPPCintheirhomebaseofSouthAfrica.Wehave
alwayshadthisaccessinmypriorexperience.PerhapsitistodowiththehauntinghistoryofSouth
Africa.Butthiswouldbeawelcomedevelopment.Itisourchancetoaskwhatwearegettingwrong
orright.Tofindsolutionstogether.”
BotswanawasanotherestablishedmarketforPPC.ThelandlockedhometotheKalahariDesertand
theOkavango Deltahas longbeen oneof Africa’s moststable andprosperous countries. Aided by
generallyfreedemocraticelections,GDPpercapitagrewfrom$650in1970to$7,000in201910.The
countryisheavily dependent on mineralresources.Nearly two thirdsofexports are diamondsand
reservesaresecondlargestgloballybehindRussia.Itisalsorichinthenickelthatiskeytothelikesof
batteriesinelectriccars.
ETHIOPIA
PPC’sexpansionstarting in 2012 createdatotalgeographic spread of more than 7,800km, from its
southern‐mostoperationinSouthAfricatothefurthestnorth inEthiopia[seeEXHIBIT 1].Inall,the
expansionstookthecompanytooperatingsevenintegratedcementplantsandfivegrindingstations;
27readymixplantswith100000m3capacitypermonth;fiveaggregatequarries;onelimefactory;and
twoflyashplants.
In July 2012 PPC acquired a 27% equity stake in Habesha Cement in Ethiopia for $7m. Here the
immediatetargetwastobuildaUS$130millioncementplantwithanannualcapacityof1,4million
tonnes. This wasto be funded by a combination of equity and $86 milliondebt funding from the

10WorldBank,constant2015USD,https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=BW

5

Development Bank of Ethiopia. Habesha raised an initial 53% of the project cost through equity
investmentsbymorethan16,000localshareholders.
TheEthiopianmarkethadsomelargefundamentalsgoingforit.Thepopulationofnearly120million
peoplewasbyfarthelargestofanyofPPC’smarketsandgrowingat2.5%peryear.Anditwasgetting
wealthier.GDPpercapitagrewwithingthebandof5%and10%between2014and2019[seeEXHIBIT
5].
EthiopiaalsorepresentedPPC’slargestgeographicalleap,directlyintothe“bulge”ofAfrica.Itmeant
delvingintonewculturesandanationwithfiveofficiallanguages.Therewasalsotheriskofconflict.
ChieflyinthesimmeringandlongstandingtensionsinthenorthernTigrayregion.Neighboursincluding
SouthSudan,SomaliaandEritreawerealsohotspotsforfighting.
These sorts of challenges can also represent possibility in the view of v an Wijnen. “Unstructured
marketsarethehardest.Buttheyalsohavethebestprospects.Ifyougetthemright.Youexactlyknow
whatyou’regettingifyoumoveintotheUnitedStatesorSouthKorea.Indevelopingeconomies,itis
theabilitytodealwithcomplexityanduncertaintythatmeanslargegainstobemade”[seeEXHIBIT
7].
RWANDA
PPCenteredRwandain2013witha51%shareholdingalongsidetheRwandangovernment’s49%in
CIMERWA.Theinitialhurdletoovercomewasanengineeringone.Theexistingplantwasantiquated
andhadcapacityforjust95,000tpa(tonsperannum)–notenoughtoachieveefficiencies.Sotheyset
aboutcommissioninganew600,000tpafacility.
RwandaisoneofAfrica’ssmallestnations,andlandlockedapartfromtheLakeKivuborderwithDRC.
Justover12millionpeoplelivethere.UnusuallyforAfrica,thecountryofferedPPCpoliticalstability.
PresidentPaulKagametookthehelmin2000.
Logisticswereananticipatedproblemintheso‐called“LandofaThousandHills”.Eventhoughthesite
inBugarama,inthewestoftinyRwandawasjust280kmfromthecapitalcityandthe construction
hubofKigali,ittooktrucksasmuchastwoweekstotraversetheruggedroadsystemthatconnected
them.Theywerealsoreliantonanetworkofindependenttruckersfortransportationofcement.With
time,this was streamlinedusinga“virtualwarehouse”.Thissystemmeantorderswereperpetually
ontheroad and an orderin Kigalicouldbe fulfilledwithinafewhours.Thisisthesortofproblem‐
solvingvanWijnenreferstowhenhedescribestheoutsizedpotentialgains being in places other
peoplewouldrathernotgo.
One of PPC’s responses to the Covid‐19 pandemic showed them thebenefitsofcommunity
engagement.Theymadethebestoftheemergencyandfast‐trackedaschool‐buildinginitiative.This
createdjobsandhelpedprimaryeducationinapartofruralRwandathatdesperatelyneededit.PPC
knewwellthatRwandahasavisionofbecomingaknowledge‐basedmiddle‐incomeeconomy. And
thatcontributingtothisispartofcreatingthatunwrittensocialandpoliticallicensetooperate.
“Ifyou’reunsure,buildaschool,”reasonedvanWijnen.“It’squitesimple.Youneedgoodrelationships
withlocalstakeholders.Let’sbeveryhonest,makingcementisnotacleanbusiness.Wedigabighole
intheground,processinputsthatburncarbonandmovelargevolumesonheavyvehicles.Thereisno
sense denying it.But we can put something back into communities.So,wefindoutwhatismost
neededandwedoourbit.Thesesocialinvestmentstypicallymeanbuildinginfrastructurelikeroads,
sanitation,andschools.Ifapoliticiancantakesomecredit,that’sfine.Ourcompanyhasexistedfor
130years.There’snowaytoachievethatwithoutgoodwillfromstakeholders.”

6

Thisapproach to stakeholderengagement isnotuniversal. VanWijnen issuedacaveat around the
wayChinesecompaniesareaddressinggoodwillinAfrica.“Idon’tthinktheapproachofmanyofthese
companiesissustainable.Notlongterm.Iseemanyofthemputtingmoneydown–peoplelikethat–
butimposingruleswithoutthesortofengagementwithstakeholdersthatissocritical.”
DEMOCRATICREPUBLICOFCONGO
Alsoin2013,PPCbeganconstructionofthenewcementplantintheDemocraticRepublicofCongo
(DRC),sometimesreferredtoasCongoKinshasa.Heretheentry mode took on yet anotherunique
shape.PPC,witha69%holding,wasoneoffourparties,alongwithtwolargeinstitutionalinvestors
andonewealthyformerstategovernor.TheentityformedPPCBarnetCement.Withamanufacturing
plantnearKimpese,inCataractesDistrictofBas‐CongoProvinceinthewestofthecountry.Thisadded
capacityforanother1,2MTpaofcement.
TheDRC covers thesame land areaas the wholeof WesternEurope. Beneath thatlies one ofthe
world’sricheststoresofnaturalresources–copper,cobalt,diamondsandpetroleumoil.Italsohas
nearlythreequartersoftheworld’scoltan–akeyingredientinmobilephones,personalcomputers,
automotiveelectronics,andcameras.
However,thisisaverypoorcountry.In2018,itwasestimated that nearly three quarters of the
Congolese population, some 60 million people, lived on less than $1.90 a day (the international
povertyrate).
Onestrategic misstep flagged intheaftermathwas a legal obligationthatformed part of thejoint
venture.TheDRCprojectcamewithcommitmentsthatanyshortfallingenerationofcashormeeting
operationaldeadlinesinthatbusinesscouldberecoupedfromtheSouthAfricanholdingcompany.
The DRC operation was never able to generate sufficient cash to service its debt owed to the
InternationalFinanceCorporation (IFC). Withtotalindustrycapacityofsome2.3milliontonnesand
demandof1.2milliontonnes,thiswasatechnicalcertainty.
TheupshotwasthatPPCinSouthAfricahadsomeUS$180millioninsenior,dollar‐denominateddebt
owedbytheDRCunit.“Asaresult,”explainsvanWijnen,“SouthAfricaendeduppayingmillionsand
millionsofdollarsintothe DRC. That was one ofthefirstthingsIrealised when Ijoined in October
2019, that we had to separate the balance sheet of South Africa from the balance sheet of the
internationaloperations.
Thatis what PPChead office inJohannesburg agreedwith lenders. “Westruck an agreementwith
them[in] Marchthisyear[2021]andwe’reimplementingthat.Consequently,we willnothaveany
economicbenefitsoutofourbusinessintheDRCforalongtime.Butmoreimportantly,therewillno
longerbe cash outflows from SouthAfrica either.I think that fixed a bigissue that wehad in the
balancesheet.”
Thiswasanexpensivemove.“WehaveprovidedtheDRCbusinesswithoverUS$70million,whatwe
calldeficiencyfunding–moneythatwasnotgeneratedintheDRCthatwassupplementedfromSouth
Africa”,says van Wijnen. “To get out of the arrangement, we paid an additionalUS$16.5 million in
earlyApril.Andwiththat,wehavedrawnabiglineunderneaththatproblem.”
Onthe goodnews, South African lenders agreed to defer arights issue to strengthenthe balance
sheet.The market breathedasighofrelief,as sharesroseasmuchas26%onthedayof31March
2021.What matteredwas thatthe PPCgroup inSouth Africawas nolonger on thehook for non‐

7

paymentofdebtsowedbytheDRCunit.Thatsaid,PPCCFOBrendaBerlinreckonedthesituationwas
that“PPCessentiallyhadnochanceofmakingmoneyfromtheDRCventurefordecades.”
ABETTERWAYTOINTERNATIONALISE?
VanWijnenspentagreatdealoftimescrutinisingthepost‐2012 expansion. “I think the
internationalisationdrivewasdoneinanopportunisticway.Onecriterionforchoosingacountrywas
thatitbeunder‐served.ButthatisprettycommoninAfrica.Sothatdoesn’tnarrowyourtargetdown.”
“SheersizewasanobviousattractioninDRCandEthiopia.Nigeriawasanotherpotentialdestination
usingthismetric.Butitwasalreadyquiteastructuredmarket,soleadershipdidn’tgothere.”
VanWijnenalsoquestionedthewisdomofthegeographicdistancestraversed.“Wejumpedawhole
lotofcountries.SuddenlywefoundourselvesallthewayinEthiopia,Rwanda,andDRC.Didthatmake
sense?Probably not.You need alogic behind thesemoves. Iwould ratherbuild aregional model,
connectingyourfootprintasyougo.Thatmeanssequentiallymovingintoneighbouringcountries.”
Brenda Berlin elaborated on the salience of geography for cement makers. “Location, location,
location.Cement operations have a natural radius of 200kmto 400km.Thisisaheavyproductand
veryexpensivetotransport.Now,imagineyoucanobtaintheonly limestone deposit in side that
radius.Andthereissufficientdemandwithinrange.Thatishardto do.Butthescopeforreturns is
immense.
“Wealsodidn’tmanageandpreparetherighttalent.Thisshouldhavebeendonefirst.Identifythe
talent already in your company, and then work out how you will source new talent in the new
country.”
Thentherewasthepuzzleofhowtoenteracountry.VanWijnen’sanalysis coveredthevarietyof
approachesPPCtook.“Youcangothegreenfieldoption.Thatmeanssinkingagreatdealofcapital
into the ground right away and running your own complete operation. That is risky. What is your
strategyforgettingreturnstoyourshareholders?Atbestitisgoingtotakealongtime.Ofcourse,this
doesmakeforthebestreturnsifitworks.Italsomakesa clear statement. Ifyouputbigmoneyin,
youarethereforthelongrun.
“OnecementcompanythatdoesthiswithmuchsuccessisCemex.TheMexicancompanyhasgrown
impressivelythroughoutLatinAmerica.There’snothingslowabouttheirapproach.Theymoveinand
implementwhattheycall‘theCemexway’.Theirlocalacquisitiongets‘Cemexed’,inasense.”
Thispost‐mergerintegration(PMI)process,championedbyCEOLorenzoZambrano,waskeytothe
company’sglobalisationssincetheearly1990s.Itisfast‐movingandreliesheavilyontechnology.The
acquiredcompanywouldhaveitsbusinessprocesses,technologyand organisational structure
standardisedthroughout.
Lessonslearnedfrom“Cemexing”aColombianacquisitiondidpromptasofteningoftheapproach.As
oneanalysisputit,“AttemptstoimposethesamemanagementprocessesandsystemsusedinMexico
onthenewlyacquiredColombianfirmsresultedinanexodusoflocaltalent.Asaresultofthedifficult
integrationprocessthatensued,CEMEX learnedthatalongsidetransferringbestpractices that had
been standardized throughout the company, it needed to make a concerted effort to learn best

8

practices from acquired companies, implementing them when appropriate. This process became
knownastheCEMEXWay.”11
VanWijnensawpotentialproblemswiththeCemexWayinanAfricancontext.“Cemexisfocusedon
aregionthatisnotnearlyasdiverseasAfricaintermsofculture,language,orgeography.Butthisis
avastcontinent.Peopleforgetthis.Lookatamap,you’llseethatKrugerNationalParkisthesizeof
Belgium.Itis55countries.Somesharecultureandlanguages,butvarietyisincredible.Ataminimum
youneedtothinkintermsofnorth,south,east,andwest.Butevenwithinthoseregionsyou’llfind
multiplelanguages and cultures.Ifyoucan’t speak easilywithlocalpartnersand stakeholders,itis
extremelydifficult.IthinkthiscontributedtoCemex’sdifficultiesinforexampleAustralia.”
Thatbeggedthequestion.Isitbettertomoveinwithasmallinvestmentandgrowgradually?“You
certainlylimityourrisk,”reckonedvanWijnen.“Youcanbeginwithagrindingstationandleaveyour
partnersprettymuch astheyare.Youprovidetechnical assistanceandhelpthemgroworganically.
Oncethereisaneedformorecashtotakethenextstep,youcaninjectthemoneyandtakeamajority
stake.That’swhenyoustandardiseandputyourownsystemsin.”
ThissentimentwasreflectedinthetakeofNjomboLekula.“ThebestofallforuswasZimbabwe.We
wereinitiallyjusttechnicaladvisorstoanexistingbusiness.Itwasonlyin2000thatwebought100%
ofthebusiness.AndbecauseZimbabweissosimilartous,wespeakthesamelanguageandthepeople
aresowelleducated,itwaseasytorunthesamesystems.”
Eventheonsetofhyperinflation12[seeEXHIBIT10]shortlyafterthepurchaseinZimbabweledtoso me
advantages,asLekulaexplained.“Westuckitoutandkeptthebusinessalive.Wetreatedpeoplewell.
Thatearnedusagreatdealofloyaltywithstaff.”
However,thegradual entrym ethod,despiteitsb ene fits,wasgettingharder.“Theissueisgovernance,
explainedvanWijnen. “In the pastyoumayhave been able totrustthat a localpartnerwasdoing
enoughtostayawayfrombriberyandcorruption.Todaythatisn’tviable.Briberyandcorruptionare
notjustamoralno‐go,butthelawsthesedaysmeanitisn’tworththeriskevenifyouwantedtouse
unethicaltactics.Youhavetochooselocalpartnerswithgreatcare.
“Lafarge,thebigglobalcementmaker,learntthisthehardway.TheirproblemsinSyria,wherethey
areallegedtohavepaidmoneyinappropriately,arewellknowninthepublicdomain.
“Holcim,asanotherexample,endedupwithlotsofcompaniesalldoingthingsdifferentlyfollowinga
stronginternational expansion.ButIthinkthey learned animportantlesson.Inthelate1990sthey
startedabigstandardisationdrive.Theynowseemtobefocusingmostlyondevelopedmarkets.
“One warning about getting involved in improper activities is that you can’t get out. I don’t think
peoplepaythat$100togetsomethingdonehavetheintentionofpayingbribesforever.Buttheyget
caughtinaspiral.So,youcan’tevenhandoverthatfirstbanknotetoanofficial.”
Independentofwhereyougoandhow,istheuniversalchallenge of selectingtherightpartners.“I
don’tthinkPPCdidenoughhomeworkonthisinseveralofourinvestments,”vanWijnencontinued.
“Put simply, partners have to like each other. It is no s ecret that we fell out with our partners in

11Lessard,DonaldR.,Lucea,Rafael(2010).MexicanInternationals:InsightsfromCEMEX.InRammamurti,R.
(Ed.)EmergingMultinationalsinEmergingMarkets(Reprintedition)CambridgeUniversityPress.
12Recordedat79.6billionpercentmonth‐on‐monthatitspeakinlate2008.Hanke,S.,Kwok,A.(2009).One
theMeasurementofZimbabwe’sHyperinflation.TheCatoJournal.Accessed15December2021
https://www.cato.org/sites/cato.org/files/serials/files/cato‐journal/2009/5/cj29n2‐8.pdf

9

RwandaandDRC.Ofcourse,youcangetitwrongattheotherextreme.InEthiopiawehavepretty
muchgonealone.Wehavesomeproblemstoresolvethere,too.”
KEEPINGTHEBANKSATTHEDOOR
Throughout2020itseemedlikelythatPPC’swoeswouldforcethemtoraisecapital.Rumoursswirled
inthe businesscommunitythat arightsissueofaroundR1.25bnwason thecards.Lenderpressure
wasgrowingasquestionsovercashgenerationpersisted.
Onemovethathelpedtostavethatoffandsatisfybankswasalargedisposal.PPCcompletedthesale
ofits non‐core limebusiness for R515min the thirdquarter of 2021.That would go someway to
payingdownthenetdebtburdenwhichhadhitR1.9bninMarch2021.
Simultaneously,cementsaleshadbegunpickingupaslockdownseasedandthecompanycompleted
along‐neededrestructuringprocess.Someoperationsweredeemednolongerviabletokeeprunning.
Theyweretrimmedbackandtheheadcountwasreducedaccordingly.
THECHALLENGE:WHERETONEXT?
Withsomeroom to breathe,havingreached a solutioninDRC in March of2021and secured local
contentdesignationinSouthAfrica,whatisnextforPPC?“First,”saysvanWijnen,perhapsrevealing
hisengineeringbackground,“weneedtomakesureourvariousoperationsareworkinglikeclockwork.
Withoutthatwedon’thaveacompellingstory.Attachedtothisistheneedforanewandbetterway
toinvestigatenewgeographies and new ventures.Ithinkwehave learned alltheright lessons for
that.
“Thenthemajortaskistohaveastronginvestmentcasetoconvincetheboardandshareholdersof
investmentsto generate growth.Wouldthere be appetitetooncemore invest incementcapacity
outsideSouthAfricaorwouldbeitbemoreappealingtolookforgrowthinotherbusinesseswithin
South Africa, Botswana and Zimbabwe [see EXHIBIT 6]. The environmental challenges to reduce
carbonemissionsmightcreateopportunitiesforPPCtolookbeyondcement.”

NearingtheendofhisvacationintheAfricanbush,vanWijnenwasfeelingre‐energisedtoreturnto
theconcretejungleinafewdays’time.HewasrelishingthechallengehisPPCrolepresented.What
willhisvaluepropositionbewhenheandhiscolleaguesintheEXCOapproachtheboard?ShouldPPC
exitanyoftheAfricanmarketsitiscurrentlyin?Wouldtheybeabletogarnersupportforamoveinto
anewcountry?Ifso,whichcountrywouldofferbetterprospectsthantheonesthathaveperformed
poorlythusfar?Whichmodesofentrymightmakethemostofanycross‐bordermove?Arethereany
non‐marketstrategiesthatvanWijnenshouldconsider?Hetook anotherdeepbreathintheshade
ofanacaciatree,andhebegansketchingouthisplans.


10

EXHIBITS:
EXHIBIT1:PPC’SGEOGRAPHICFOOTPRINT(2021)


SOURCE:PPCANNUALREPORTS


11

EXHIBIT2:PPC’SEXHISTINGOPERATINGGEOGRAPHIESPRIORTOTHEINTERNATIONALISATION
DRIVEANDTARGETAREASFORPOTENTIALEXPANSION(2011)

SOURCE:PPCANNUALREPORTS










12


EXHIBIT3:PPC’SPRODUCTLINE

SOURCE:PPCANNUALREPORTS













13

EXHIBIT4:CEMENTCONSUMPTIONPERCAPITAPLOTTEDAGAINSTGDPPERCAPITA

SOURCE:Saville(2019)

EXHIBIT5:GDP/CAPITAPLOTTEDAGAINSTGROWTHINGDP/CAPITAFORSELECTEDAFRICAN
COUNTRIES

Angola
Botswana
DRC
Ethiopia
Kenya
Malawi
Mozambique
Namibia
Rwanda
Somalia
SouthAfrica
Tanzania
Zambia
Zimbabwe
y=1E‐09x2+3E‐05x+0,031
R²=0,9666
0,00
0,05
0,10
0,15
0,20
0,25
0,30
0,35
0 1000 2000 3000 4000 5000 6000 7000
CementConsumptionPerCapita(Tons/Person)
GDPPerCapita(USD/Person)(Constant2015USD)
CementConsumptionPerCapitavsGDPPerCapita‐ 10YearAverage

14

SOURCE:Saville(2019)
SizeofcirclerepresentscountryGDPin$’bn(2019)


EXHIBIT6:GDP/CAPITAANDSIXFACTORMODEL‐BASEDFORECASTGDP/CAPITAGROWTHFOR
SELECTAFRICANCOUNTRIES.


SOURCE:Saville(2019)
SizeofcirclerepresentscountryGDPin$’bn(2019)


15

EXHIBIT7:COMPONENTSOFTHESIXFACTORMODEL
Factor Proxydescriptors,unitsandlags Multi‐factor
coefficients
Savingsand
Investment
 Structuralinvestmentrate(ten‐yearaverage%
GDP)
 Stabilityofinvestment(σ)
 Structuralrateofsaving(ten‐yearaverage%GDP)
 Stabilityofsaving(σ)
 Savings‐investmentgap(%GDP)
27.5
Demography  Populationgrowth(15‐yearlag) 5.1
Policyand
Institutions
 Macroeconomicmanagementratingindex
 Transparency,accountability,andcorruptioninthe
publicsectorindex
 Publicsectormanagementandinstitutionscluster
strengthindex
 Easeofdoingbusinessindex,timetoopena
business(days);costofbusinessstart‐up
procedures(%ofincomeperperson);logistics
performanceindex
15
Education  Pre‐primaryenrolmentrate(gross%)
 Primaryschoolenrolmentrate(net%)
 Secondaryschoolenrolmentrate(net%)
 Tertiaryeducationenrolmentrate(gross%)
 Adolescentsoutofschool(%oflowersecondary
schoolage)
12.4
Healthcare  Infantmortalityrate(per1,000livebirths)
 Lifeexpectancyatbirth(years)
15.7
Openness  Imports&exportsrelativetoGDP(%)
 Exportcomplexityindex
 ForeigncapitalflowsrelativetoGDP(%)
 TCIPindex
24.3

SOURCE:Saville(2021)


16

EXHIBIT8:THESIXFACTORMODEL:SIXFACTORSCORESPLOTTEDAGAINSTSTRUCTURALGROWTH
PROSPECTS


SOURCE:Saville(2021).
















EXHIBIT9:SIXFACTORSCORESFORSELECTAFRICANCOUNTRIES(2021)

17



GDP
Popu latio n
GDP/Capita
GDP/Capita
Growth(SixFactor
Model)
GDPGrowth
(Economic
ComplexityModel)
ProductiveSector
Contributionto
GDP
IndustrialVolatility
(Sensitivity)
CAGEScore
Inequality
Fractionalisation
Investability
IndustrialAgility
(Readiness&
Innovation)
$'bn) ('mn) ($) (%p.a.2021‐
2030)
(%p.a. 2020‐
2028)
(GDFI+NXas
%GDP) (%,s.d.) (1=Best15=
Worst)
(GiniCo‐
efficient)
(PREG
Metric)
(Currency
Rank)(x/79)
Global
Innovation
Index2020
Angola 94,6 31,8 3432 0,6 3,5 29,4 8,0 12,3 51,3 0,65 66 13,6
Botswana 18,6 2,3 8258 1,6 3,1 30,6 7,0 3,5 53,3 0,05 11 25,4
DRC 47,3 86,8 561 0,3 1,9 17,6 4,3 12,0 42,1 0,80 65 13,6
Ethiopia 96,7 112,1 772 3,0 5,1 19,5 4,6 6,8 35,0 0,57 72 18,1
Kenya 95,5 52,6 1710 2,6 5,0 9,1 2,2 3,0 40,8 0,57 69 26,1
Malawi 7,7 18,6 389 1,7 4,5 5,9 7,6 8,0 44,7 0,55 75 21,4
Mozambique 14,9 30,4 498 3,7 5,5 8,2 3,4 9,5 54,0 0,36 68 18,7
Namibia 12,9 2,5 5931 1,1 3,8 7,5 3,6 5,8 59,1 0,55 63 22,5
Rwanda 10,1 12,6 820 2,8 5,1 8,2 2,3 4,5 43,7 0,26 60 25,1
Somali a 4,9 15,4 348 ‐4,1 3,5 18,7 0,4 13,0 39,7 0,35 79 13,6
South Afri ca 351,0 58,6 6374 0,5 2,6 19,5 2,1 1,5 63,0 0,49 62 32,7
SouthSudan 4,6 11,0 1280 ‐2,1 6,5 ‐21,6 7,0 13,5 46,3 0,41 79 13,6
Tanzania 63,2 58,0 1060 3,2 7,2 26,9 1,7 5,5 40,5 0,59 51 25,6
Zambia 23,1 17,9 1539 3,8 4,1 35,5 4,0 5,5 44,3 0,71 67 19,4
Zimbab we 21,5 14,6 2146 ‐1,9 3,8 ‐2,2 19,5 8,0 57,1 0,41 76 20,0

18



SOURCE:Saville(2021)
SouthAfricaisplottedagainstanaveragescoreofothercountriesonthelist.
GDP
Population
GDP/Capita
GDP/Capita
Growth(SixFactor
Model)
GDPGrowth
(Economi c
ComplexityModel)
ProductiveSector
Contributionto
GDP
IndustrialVolatility
(Sensitivity)
CAGEScore
Inequa lity
Fractionalisation
Investability
IndustrialAgility
(Readiness&
Innova tion )
RankScore
RankVolatility
$'bn) ('mn) ($) (%p.a. 2021‐
2030)
(%p.a. 2020‐
2028)
(GDFI+NXas
%GDP) (%,s.d .) (1=Best 15=
Worst)
(GiniC o‐
efficient)
(PREG
Metric)
(Currency
Rank)(x/79)
Global
Innovation
Index 2020
(Mean) (%, s.d.)
Angola 4 6 4 1012 3 14131013 7 12A9,0 4,0
Botswana 9151 8132123111 1 4B
o
6,7 5,2
DRC 6 21212158 912515612D9,5 4,1
Ethio pia 2 1 11 4 5 5 10 8 1 10 11 11 E
t
6,6 4,0
Kenya 35666942410102K
e
5,6 2,8
Malawi 138147 713139 8 8127
M
9,9 2,8
Mozambi que 10 7 13 2 3 10 6 11 12 4 9 10
M
8,1 3,6
Namibia 1114399127714856N8,8 3,5
Rwanda 1212105410546235R
w
6,5 3,5
Somalia 1410151511 7 1 14 2 3 1412S
o
9,8 5,3
SouthAfrica132111453115741S
o
5,6 5,1
SouthSudan1513 8 14 2 151115 9 5 1412S
o
11,1 4,3
Tanzania 5493142531223T
a
4,4 3,1
Zambia 7971818571489Z
a
7,0 3,5
Zimbabwe 8 11 5 13 10 14 15 9 13 5 13 8 Z
i
10,3 3,4

19

EXHIBIT10:INFLATIONRATESPLOTTEDAGAINSTMONEYSUPPLYGROWTHFORAFRICAN
COUNTRIES

SOURCE:Saville(2021)


Algeria
Angola
Botswana
Congo,Dem.Rep.
Ethiopia
Kenya
Malawi
Mozambique
Namibia
Rwanda
Somalia
SouthAfrica
Tanzania
Zambia
Zimbabwe
y=‐0,0045x2+1,3166x+4,461
R²=0,8965
0
10
20
30
40
50
60
0 5 10 15 20 25 30 35 40
MoneySupplyGrowth
InflationRate
MoneySupplyGrowthvsInflation
10YearAverage

20

EXHIBIT11:PPCCONDENSEDCONSOLODATEDSTATEMENTS(31/03/2022)


21


Source:PPCannualreports(2022).
