Zimbabwe’s unlikely construction boom

PPC group Chief Financial Officer Tryphosa Ramano

RECENT updates by listed construction companies point to an unlikely boom in Zimbabwean construction.

This time last year, Turnall, a leading manufacturer of building materials and piping, was staring at bankruptcy. The company had posted a loss of $4.1 million and was fighting off creditors. Workers had to take a pay cut to keep the company afloat.

Fast forward to June this year, and Roseline Chisveto, the Turnall MD, was beaming as she presented an update at a company AGM. The numbers were better than expected. In the five months to May, turnover was 79 percent up. Sales volumes were at 16 578 tonnes, a 71 percent increase.

Most telling was the strong demand witnessed in the first quarter of the year, which is usually slow for construction due to the weather and tight income.

“We traditionally see a slump in turnover in the first quarter and a gradual increase in the second quarter,” she said. Business, traditionally, was stronger in the second half of the year.

The company has now swung from a loss in 2016 and 2017 and is now back in the black, Chisveto told shareholders. The company has churned 20 108 tonnes of production, some 107 percent above the same period last year.  

For the first time in years, Turnall is upbeat about its prospects.

“Business prospects are actually promising and there is good space to take advantage of opportunities as construction activities pick up in the second half of the year”, Chisveto.

Masimba Holdings, the leading construction firm formerly known as Murray & Roberts, is also seeing an upturn.

In the four months to April, pre-tax earnings rose 150 percent. CEO Canada Malunga reported revenue up 52 percent over the same period. Prospects look positive for 2019, with Masimba already sitting on increasing orders from agriculture, mining and housing.

Cement makers are riding on the recovery. Johan Claassen, CEO of PPC Africa, says volumes from its Zimbabwe business were up 46 percent for the year. Zimbabwe operations saw revenue growing by 34 percent to R1.8 billion. Zimbabwe is the biggest contributor to group revenue and EBITDA after southern Africa, which includes South Africa and Botswana.

“We put a plant in Harare, as we never had operations there before,” PPC group Chief Financial Officer Tryphosa Ramano said.

PPC’s Harare plant/NewsDay

Barzem, a major retailer of construction equipment, saw its revenues rise 16 percent in the first four months of the year. Parts sales were 150 percent up, helping the company move from a loss position last year and into profit. Barzem said in an update: “Government’s thrust on infrastructure projects offers more confidence to the business unit as we approach the second half.”

While the figures from the companies are looking strong, the underlying reasons for the boom should be cause for some concern. PPC’s Ramano provided clues during PPC’s results presentation.

“Instead of people putting money into their bank account, people are building. There is a boom in terms of building,” said Ramano.

This evokes memories of the hyper-inflationary period, where property and construction materials became a hedge against rising prices.

Malunga of Masimba, despite his upbeat outlook, cautioned that forex shortages in the market have distorted pricing and made sourcing of key products harder. PPC says the liquidity issues “continue to prevail in Zimbabwe” and the company is has implemented strategies to mitigate the risk by localising procurement and increasing exports.

But PPC appears ready to stay the course.

“The political landscape is improving in Zimbabwe, with elections scheduled for July 2018. PPC Zimbabwe is well positioned to benefit from improved growth prospects,” PPC says. It is banking on getting a piece of planned Chinese investment in Zimbabwean infrastructure. PPC is working on repairing roads and expanding Zimbabwe’s airport, Ramano added.