Thesis (MBA)--Stellenbosch University, 2000. / ENGLISH ABSTRACT: The changing political landscape, which culminated in the all-inclusive election of
1994, enfranchised the previously excluded majority voters and ushered into SA a
government with a different agenda. This was an important landmark in the
development of the SA business environment. Having pledged itself to improve the
social and economic standards of the poor majority, the ANC-COSATU-SACP led
government is committed to the elimination of barriers to enter any industry and
stimulate the economy in order to improve employment opportunities.
Until 1996 cement producers in SA co-operated under an official cartel that facilitated
price-fixing and joint marketing and distribution. This study shows that during that
period the industry recorded a healthy performance until 1996 when the cartel was
dissolved. The industry performance suddenly plummeted in1996 and since then has
remained on a downward trend.
Analysis of the industry confirms that the industry has the characteristics of a
monopoly. Three producers, namely PPC, Alpha and Lafarge, dominate the industry.
The "big three" control almost 100 percent of the cement market with a cross
ownership of assets which straddle the whole cement industry' in SA. Besides the
assets along the cement value chain, the industry effectively has sole control of
alternative cement materials businesses, namely ash and slag, and owns significant
interests in aggregates and ready-mix concrete businesses too.
The dissolution of the cartel in 1996 effectively disallowed price fixing, joint capacity
planning and any other collusion as defined by the Competition Act of 1998.
Subsequently, players are expected to fiercely compete in an industry that is an
oligopoly. According to classical economics, co-operation is the effective conduct to
survive in an oligopoly. Hence the contradiction between national expectations and
structure of the industry creates a dilemma for asset owners.
The principal barrier to entry into the SA cement industry emanates from the high
capital investment requirements. This study shows that it is mainly the clinker
manufacturing component of the value chain that requires very high investments. A
group of small entrepreneurs, engaged in blending cement with ash or slag and selling the product in competition with equivalent products from traditional producers, has
successfully entered the lower end of the industry. This is testimony to the fact that
sections of the value chain have no barriers to entry. It is believed that as producers of
clinker face high sunk costs they have reason to encourage more clinker content in
their cement products. They may, therefore, stifle further development of alternative
materials.
The national imperative - to breakdown concentration of industries to allow for easy
entry - seems to be in conflict with the profit motive that businesses to survive. This
study therefore recommends an alternative strategy that could accommodate both
views. An amenable strategy is for the industry to be redefined into three distinct subsectors
with minimal cross-ownership of assets. The three sub-sectors are:
1. Clinker manufacturing:
Clinker is a commodity that requires high investment costs. The sector should
therefore be offered legal dispensation to operate as a monopoly but with enough
regulation to ensure efficiency. It is recommended that players in this sector are
allowed to co-operate for efficiency reasons and prices are strictly controlled by a
regulator. The regulator must also ensure that the manufacturer is prohibited from
owning interests in any other cement sub-sector, to eliminate industry control by a few.
w
Thus this sector must be rid of interests in aggregate, alternative materials and readymix
businesses.
2. Cement manufacturing:
A sub-sector for the manufacture of cement, clearly distinct from clinker production
should be created. Processes for this sub-sector will commence with milling of clinker
into cement and extend to marketing and distribution to end users.
3. Alternative cement materials:
In view of economic stimulation, the development of alternative materials to compete
with clinker should be encouraged. This sub-sector should be charged with research
and development of these materials, and be allowed to blend them for marketing and
distribution to end users.
There are many implications that emanate from the myriad of stakeholders. Besides
local owners of cement assets in SA, international asset owners and entrepreneurs in SA form part of the stakeholders. Thus shrewd planners will be required to champion
this idea. It is therefore recommended that a team of academics and business
practitioners be commissioned to investigate this and take it further. / AFRIKAANSE OPSOMMING: Die veranderende politieke omgewing, wat uiteengeloop het op die 1994 verkiesing,
het die meerderheid kiesers tesame met die nuwe regering in 'n nuwe bedeling ingelei.
Dit was 'n belangrike baken in die ontwikkeling van die Suid Afrikaanse
besigheidsomgewing. Die nuutgevonde ANC-COSATU-SACP regering het homself
toegewy aan sy beloftes om die sosiale en ekonomiese standaarde van die arm
meerderheid van die bevolking aan te spreek, en daarmee saam om toegang tot
industrie te vergemaklik, die ekonomie te stimuleer en werksgeleenthede te bevorder.
Tot 1996 het sement vervaardigers in SA onder 'n offisiele kartel geopereer. Die kartel
het gesorg vir fasilitering van prysbepaling, en gesamentlike bemarking en distribusie.
Hierdie studie dui aan dat die sement industrie floreer het tot 1996, waarna die kartel
ontbind is. Sederdien het die industrie in duie gestort, en is steeds in 'n afwaartse
tendens.
'n Analise van die sement industrie toon die karaktereienskappe van 'n monopolie.
Drie vervaardigers, nl. PPC, Alpha en Lafarge, domineer die industrie. Die "groot drie"
beheer byna 100 persent van die sement industrie, en het verdeelde besitting van alle
bates. Daarbenewens beheer hulle ook gedeeltelik of ten volle alle alternatiewe
sement materiale besighede en ander verwante belange.
Die ontbinding van die kartel in 1996 het effektiewelik prysbepaling verbied, asook
gesamentlike kapasiteitsbeplanning en enige ander sameswering soos bepaal deur
die Wet op Kompetisie van 1998. Dit word dus van alle spelers in die industrie
verwag om gelykmatig te kompeteer in 'n oligopoliese industrie. Dit het egter 'n
dilemma veroorsaak rondom die eienaarskap van voorheen gedeelde bates.
Kapitale investering is die primêre verhindering tot toegang tot die sement industrie.
Hierdie studie toon dat dit hoofsaaklik die klinkersteen vervaardigings komponent is
wat groot investering vereis. 'n Groep entrepreneurs het 'n produk ontwikkel deur
sement met as te vermeng, en sodoende 'n laer kwaliteit steen te vervaardig waarmee
hulle suksesvol in 'n sekere marksegment meeding. Dit is getuienis van die feit dat
sekere dele van die waardeketting relatief maklik binnegedring kan word. Die huidige vervaardigers van klinker produkte is onwillig om alternatiewe podukte te vervaardig,
aangesien hulle die hoë koste van hul toerusting en die dienooreenkomstige kapitale
investing moet regverdig.
Die regeringsvisie om groot industrie af te breek om sodoende toegang tot industrie te
vergemaklik, blyk in teenstelling te wees met die winsgerigtheid van besigheid.
Hierdie studie stel 'n alternatiewe strategie voor wat beide visies kan akkomodeer. Dit
stel 'n strategie voor wat die industrie sal herdefinieer in drie sub-sektore met minimale
deling van bates. Hierdie sub-sektore is:
1. Klinker vervaardiging:
Klinker is 'n kommoditeit wat groot kapitale investering vereis. Hierdie sektor moet dus
toegelaat word om binne perke as 'n monopolie te opereer, met genoegsame
regulering om effektiwiteit te verseker. Dit word voorgestel dat spelers in hierdie
sektor toegelaat moet word om te koopereer om optimale vlakke van produksiekoste
te handhaaf, en dat pryse streng gekontroleer word deur 'n regulerende liggaam.
Hierdie sektor moet ook verbied word om enige ander besigheids en finansiele
belange te hou by enige ander sement industrie sektor.
2. Sement vervaardiging:
'n Subsektor vir die vervaardiging van sement, duidelik onderskei van klinker
vervaardiging, moet geskep word. Prosesse vir hierdie subsektor sal begin met die
maal van klinker en bemarking en distribusie insluit.
3. Alternatiewe sement materiale:
Die ontwikkeling van alternatiewe produkte om te kompeteer met klinker moet
aangemoedig word. Hierdie subsektor moet hul toewy aan navorsing en ontwikkeling,
sowel as vervaardiging, bemarking en distribusie.
Daar is baie implikasies wat voortspruit vanuit die magdom belanghebbenes. Bo en
behalwe die plaaslike eienaars van sement bates in SA, vorm internasionale bateeienaars
en entrepreneurs ook deel van die belanghebbenes. Dit word dus voorgestel
dat 'n span bestaande uit akademici en besigheid aangestel word om hierdie
voorstelle verder te ondersoek.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/51583 |
| Date | 12 1900 |
| Creators | Makhoba, Moses M. |
| Contributors | Oosthuizen, H., Stellenbosch University. Faculty of Economic & Management Sciences. Graduate School of Business . |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | Unknown |
| Type | Thesis |
| Format | 86 leaves : ill. |
| Rights | Stellenbosch University |
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