Pretoria - Lafarge South Africa, the local subsidiary of the French-based global leader in building materials, is to increase the capacity of its Lichtenburg cement works in the North West by about 1 million tons.
Lafarge South Africa, formerly known as Blue Circle, said yesterday its decision followed the completion of a feasibility study.
The project was expected to be completed in 2008. Ilse Boshoff, Lafarge South Africa's national communications manager, said it was unable to provide a value for its investment to increase the plant's capacity because its feasibility study had not yet been completed.
This contradicted the company's statement on the project.
Barloworld's listed cement and lime subsidiary, PPC, last week announced it would increase its inland cement capacity by more than 1 million tons a year.
PPC said this would require an investment of R1.36 billion and hinted that its major competitors, Lafarge and Holcim, were expected to announce investments to increase their cement capacity.
PPC said total cement demand in South Africa was almost 13 million tons a year but was projected to exceed 16 million tons a year by 2010. It anticipated that demand would be driven by the improvement in the country's economic fundamentals and major projects in the pipeline.
Gavin Bantam, a construction analyst at Nedcor Securities, said the announcement by Lafarge was not unexpected.
"If they don't expand now they may lose market share in the future because of the projected growth in the market in the next few years."
The Lichtenburg facility has a capacity of 2.5 million tons and Lafarge claimed the plant was already the largest and most technically advanced in the country.
The company said R120 million had already been allocated to upgrade the cement grinding and packaging plant at Lichtenburg. It said this project began early this year and would increase the plant's grinding capacity by 30 percent.
This project would be completed next year and would enable Lafarge South Africa to continue satisfying the anticipated demand from the market in the interim until 2008.
Lafarge added that the investments at Lichtenburg would allow the company to maintain its strong position in the market and reinforce Lafarge Cement as the quality, value-added supplier to the construction industry.
Boshoff said the expansion of the plant would not create a flood of jobs because of the technology changes in the production process. However, with Lafarge being an international company, staff would get additional training.
Boshoff said the capacity of the plant was being expanded because "the industry is growing and we need to grow with it.
"We need to continue satisfying the anticipated demand."
Boshoff said more than 60 percent of the company's cement went into the bag market, which could be used for the residential or non-residential market, with the remainder used for the ready-mix and civil construction sectors.
PPC shares added R5.10 to close at R272 yesterday, while the construction and building materials sector rose 2.72 percent. Lafarge South Africa is not listed.