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Zambia 2014 | CONSTRUCTION & REAL ESTATE | INTERVIEW

TBY talks to Emmanuel Rigaux, CEO of Lafarge Zambia, on the strong growth in the cement industry, and the boom in domestic demand.

Emmanuel Rigaux
BIOGRAPHY
Emmanuel Rigaux joined Lafarge Zambia in 2013 following his appointment as Country CEO. His previous role was with Lafarge Tarmac UK, where he held the position of Director of Integration for the joint venture between Lafarge UK and Tarmac. He joined the Lafarge Group in 1999. He has worked in a number of roles across a range of global markets including France, North America, and the UK.

The profit after taxes of Lafarge Zambia has doubled from 2010 to 2013. What has been behind your growth story?

What has happened is that essentially, we have been able to increase production. We have increased production by over 50%. We had an entirely new cement plant commissioned in 2008, and we've kept improving the performance of that plant since then. As well, we have another plant in the Copperbelt near the DRC border. It's an older plant, but we have been able to improve the reliability and the performance there, and that has really enabled us to bring more cement to the market and follow the demand for cement, which is strong.

What is most influencing the demand for cement in Zambia?

Clearly, the road projects have been a key driver of growth in the last few years. A country like Zambia needs to upgrade its level of infrastructure because its potential to grow is very much linked to the logistical connections with all the neighboring countries, and there are many of them, which means many opportunities to export. Infrastructure is absolutely key. Road building is going on at a very quick pace. In the coming years, rail will also become a very important segment. You've got the infrastructure, which in the last two years has probably been the fastest pace-setter in the economy. You also have a high growth rate in the commercial sector. There are many new shopping centers popping up around Lusaka. There was a real lack of them before. It's not just Lusaka. You see the same in Ndola and other cities. Those cities are transforming themselves. This is all encouraging and very much in line with our ambitions to build better cities.

How much of your production do you export abroad?

We are currently exporting, on average over the last four years, around 20% of our production. We could export more. In the coming years it is quite clear that we will be exporting more to countries like Zimbabwe, Mozambique, and the DRC, which is currently our second-largest market. We've been constrained by our capacity because the domestic market has grown so fast. Our priority had to be to supply the domestic market first. The construction market here in Zambia and in a lot of countries in Sub-Saharan Africa is highly seasonally, so the demand in October is two or three times the level that you would see in January or February. That's really the challenge for a company that doesn't have infinitely scalable production capacity to adapt and follow the market as much as possible and supply the market in all months of the year.

One of the characteristics of Lafarge is that it is a very innovative company. How does your plant in Zambia enable you to innovate to supply the market?

Innovation is first and foremost a human thing more than an industrial one. There is no innovation without technical skills. We've invested a lot into training new talents and making sure that we have a strong technical and marketing team here in Zambia. We started early on in our history here, which means that today we have a really great pipeline and some of the best talents, to such an extent that we recently inaugurated our concrete lab. There are companies and institutions, like the Road Development Agency (RDA), coming to us to ask for advice or to do testing. It shows that we have gained real credibility and that we have the people in place to push innovation. We have one major strength as an international group, which is that we can leverage innovation that has already worked in other countries. For example, we are pushing new products. We just launched a product for road stabilization called “RoadCem" and a project for interior plasticizers called “WallCrete." That would not have been possible without our central lab. You've got this combination, and obviously we go with innovations that make sense for us. There is a very wide range of possibilities, and we have to choose what is particularly relevant to Zambia.

How does Large Zambia fit into the company's overall strategy?

Lafarge is present in over 60 countries. Zambia used to be a mid-sized country in the Lafarge portfolio, which was doing well. I think the perspective has changed in the last few years. Zambia and other sub-Saharan countries have become the key focus for the growth of Lafarge, and, therefore, we have changed gears completely. In fact, we are at a crossroads. We have been successful here. We are now the highest market cap on the Lusaka Stock Exchange (LuSE), and are now moving to a new dimension to become a hub for the region. We are going to more than double the capacity of our cement plant here. We are going to add a second line, which is going to be larger than the 2008 one. We are also expanding the capacity of our plant in Ndola. The face of Lafarge Zambia in five years is going to be very different than it is today. If you had bought ZMW1,000 of Lafarge shares in 1995, you would today have a portfolio of ZMW375,000, not counting the dividends.

The slogan of Lafarge in Zambia is “Building Better Cities." How are you building better, sustainable cities in Zambia?

That's very important for us. It really drives the way we are transforming ourselves from a strategic viewpoint, moving from supplying construction materials, to participating in the construction of better cities. That means, in Lusaka, we work with the government and the planning authorities on projects as diverse as landfills and waste collection, because we can burn some of the waste in our kilns and there is a real issue in the collection of domestic waste. We are also working on concrete roads, as opposed to tar roads, which have issues and need to be redone quickly. We work on the entire lifecycle of the road, and we also work on mass affordable housing. There is an issue now that didn't exist a few years ago around land. Many Zambians don't have access to land at all because they don't have the capital. There is a major housing deficit here. It's difficult to put a number on it, but several million houses need to be built so people can live in a decent home. Because the interest rates are so high, if you take out a mortgage here in Zambia your interest rate is 20%-25%. In Europe, these are in the order of 2%-3%. This is a real issue. We have to find a way to reduce the cost of housing. We don't have an influence on the level of interest rates, but we can influence the cost of housing and construction. That is where we are also working with other countries. We have worked in Nigeria on the technical solutions that we can bring. There are examples there of technical solutions that reduce costs and improve the quality of housing from many points of view , including in environmental terms. We have numerous corporate social responsibility (CSR) initiatives. For example, we have a housing program for employees that is giving them the opportunity to have access to a good, solid home that they can keep for their family. This is not a small program. There is a first phase of 450 houses and a second phase of 600 houses, and it's just the pilot for something that can be a lot broader as part of a mass affordable housing program. We also work on micro credit and microfinancing. We have partnerships with several banks and insurance companies to give access to funding to relatively low-level incomes.

What is your outlook for Lafarge in Zambia for the medium term?

The outlook is positive. The fact that we are investing so heavily bears witness to that. We are very confident that this market will continue to grow, as will the other markets we are serving, like the DRC. We have a young and vibrant population with also a high level of growth. The challenge for us really is to be able to serve this country, to manage this organization in a way that makes the people that live in those cities satisfied. The growth is absolutely incredible. So we really have a role to play there and it is a fantastic opportunity for us to be a part of that.