Nedbank Capital and the Bank of China Johannesburg have jointly announced the raising of debt capital to fund a new entrant into the Southern African cement industry, namely Mamba Cement. This is one of the first pure limited recourse project finance deals undertaken and funded by Chinese entities on the African continent.
The equity required for the project was provided by the Jidong Development Group (majority shareholder in the project), the China-Africa Development Fund and WIPHOLD. The funding for the project amounting to R1,1 billion was structured on a greenfields project finance basis, a complex arrangement requiring a thorough technical, financial and legal due diligence, which was contracted through a multitude of project, finance and security agreements.
Mamba Cement will manufacture high quality pure cement with the capacity to produce very cost effective products. It is expected to produce a highly sought after product both from a quality and versatility point of view, with a sustainable transport advantage due to its proximity to the major cement demand centers of Johannesburg, Pretoria, Mpumalanga, Rustenburg and Brits.
According to Mike Peo, Head of Infrastructure, Energy & Telecommunications at Nedbank Capital, the highly complex project finance deal is the first opportunity for Nedbank and Bank of China Johannesburg to work together as joint mandated lead arrangers and is testament to the two banks’ ability to work together. In addition, providing the South African and Chinese sponsor grouping with a seamless and professional service offering augurs well for the possibility of similar collaborations in the future. Based on the success of the Mamba Cement project, Jidong has approached Nedbank Capital and Bank of China Johannesburg to act as its banking partners in its expansion efforts into the rest of the continent.
Mr Zhikun Qiu, Chief Executive Officer at Bank of China Johannesburg says the deal held particular appeal given the significant economic development potential it holds for southern Africa as a whole. “A new entrant will not only help to instil competition into the market, but also serve to stimulate economic growth and job creation in line with the country’s established development plans. The Bank of China is pleased to have been a key part of such an economically relevant initiative.”
When completed, the Mamba Cement project will result in a brand new cement plant with a capacity of more than one million tonnes per annum located at an established limestone deposit near Northam in Limpopo Province. Once operational, Mamba Cement will produce and sell cement into the blended cements, readymix and construction industries across South Africa.
The project, both through its construction and operations, is expected to provide opportunities for employment and SMME supplier growth, particularly for communities in the lower income areas north of Brits. In addition, the sponsors and developers have also committed to supporting local schools and other socio-economic development initiatives in the long term. The project will also result in a major improvement of basic infrastructure such as power and roads which will benefit adjacent communities.