Zambia: Interview with Emmanuel Rigaux

Emmanuel Rigaux

Chief Executive Officer & Managing Director (LaFarge Zambia)

Emmanuel Rigaux

The foreign direct investment field is highly dynamic and competitive, with virtually all countries in the region battling to secure foreign investment. What would you say are Zambia’s most significant comparative advantages compared to other countries in southern Africa? 

Zambia is a stable country with a relatively stable regulatory framework. I think it also has a relatively highly skilled labor force and a growing population. The population, although rather small, is growing really fast. It is a really young country with more or less two thirds of the population less than 20 years old.

Then of course the natural resources are very significant and have justified large mining investment in the past few years. I would say also - and it is probably more visible now than it was – that Zambia has a real potential to be a hub, from an industrial viewpoint into the region. The rail network is still weak but the road network is improving. From a competitiveness viewpoint, Zambia is surrounded by countries that are either completely dollarized or partly dollarized, and it has a big benefit from that perspective.

I think that Zambia really has opportunities to develop exports. In fact this year we are ramping up our exports very significantly, partly because the domestic market is difficult but also because there are real opportunities out there especially in DR Congo (Democratic Republic of Congo), Malawi and Angola. The new bridge that was built in Western Zambia opens up further opportunities for trade between Angola and Zambia. Already today you can see that trade is very active between Zambia and DR Congo, Zambia and Malawi, not so much however between Zambia and Mozambique. So that is probably an opportunity for growth particularly with the Tete Province if all the coal projects come to fruition. Then of course with Zimbabwe there is a lot of trade traditionally, so for me that’s the key asset in terms of potential for Zambia.

President Lungu visited Paris last month at the invitation of President Hollande. He became the first Head of State to visit France in 23 years and his trip culminated in the signing of six multi-sectorial agreements. How do you think his visit will improve the bilateral relations between Zambia and France?

That’s more a question for the Ambassador because I don’t necessarily have the full perspective, but I think that it can only be a good thing if it can make France better known in Zambia and Zambia better known in France because I think there is a lot to do there. Then it creates I think, just from a psychological viewpoint, a good platform to reinforce the investment from both sides.  

Last year Lafarge completed a merger with Switzerland’s Holcim to become the world’s biggest cement producer. Today LafargeHolcim has more than 100,000 employees, over 2,500 plants and a local presence in 90 countries. In your opinion, how will this merger strengthen operations worldwide?

We have announced really clear synergy targets and in fact we have already exceeded some of those for 2015 as you can see; if I refer you to the financial results that we presented for the full year. It is very clear from a country perspective, even in a country where you only had previous legacy Lafarge operations, we do see synergies. These are tangible benefits that we are getting from the merger, be it from some purchasing contracts where we take advantage of the scale of the new group, or from some good practices and expertise, particularly technical expertise that we are getting. We are also benefiting from programs which were launched in the former Holcim group, so we see a lot of things coming and I think 2016 in that regard will be the first full year of synergies and they are significant for Zambia. I expect them to be really significant for the full group as well.

Given Africa’s future growth is intrinsically linked to cement, it’s no surprise that Africa’s richest man, Aliko Dangote, is striving to challenge Lafarge’s dominance in Zambia. Last year the Nigerian billionaire opened a new factory just 30 kilometers from yours, which is said to produce more than Lafarge’s two existing factories combined. How are you ensuring that Lafarge Zambia stays ahead of this new yet powerful competition?

Even before Dangote’s arrival on the market Lafarge Zambia was operating in a competitive environment. We did have a large market share but we were competing domestically with other players called Zambezi Portland and Oriental Quarries. Although those players are not international players, they are still players in the cement market. The other thing is that we are part of several free trade zones like SADC and COMESA, so there has always been a flow of cement coming from Zimbabwe or Namibia into Zambia.

It is true that the level of competition has been intensifying but that is the case in almost all African economies and it shows that the maturity that those economies have reached is now very different from what it was five years ago. It is a good sign for the economies of these countries. 

The big difference that we have compared to any of our competitors is our people. Other companies typically come and run their businesses with a huge number of expatriates and they don’t invest much at all in the local workforce. We run our business with essentially six expats and we have engineers who have gone to train in the USA, etc. I think they see the value of belonging to a group like LafargeHolcim so in the long term it is the only sustainable way to operate in Zambia.

Dangote’s plant is in Ndola, which is 30 kilometers away from our Ndola plant, so we are much better positioned to serve the Lusaka and southern markets than Dangote is. The other thing is thatAlso it is one thing to build a certain capacity and , another is to actually to run your plant to that capacity and I think they have challenges there. I think we’ve shown that we are able to remain the market leader and Dangote has gone for a business model that is very different from ours. With some respect, it is not really sustainable but we’ll see. As you said it is very new so we’ll have to wait a little bit to see how that works. Also for me it confirms that we were absolutely right to invest first and the fact that other players try to copy to a large extent what we have done is more recognition that we did well.

Lafarge has built a long-term relationship with Zambia over the years but as we just discussed, competition is intensifying and reports - claiming the company has taken advantage of a so-called monopoly - have surfaced even though they have been strongly denied. Given these factors, what are your priorities in order to reinforce the company’s brand in, and commitment to, the Zambian market?

I think our brands remain very strong and the equity that Lafarge represents in the market is still very strong. Competition, whether it’s from Dangote or other players, is a normal situation. It is the situation that we are dealing with in nearly all African countries, and as those countries are developing, the construction sector is growing and the fact that we were quite successful by being the first investor, creates incentives for other players to invest. So there is nothing that is difficult or unusual for a company that has the history of Lafarge in Zambia and it means that we have to adjust our cost base all the time but that I would say is more driven by the new environment that has been very challenging the last 12 months. We have a lot of other markets that we serve out of Zambia so we welcomed this new competition. It is healthy to have several players in this industry and I am absolutely convinced that our business model is superior to the one you see from any of our competitors. 

Lafarge places innovation at the heart of its priorities. Can you give some examples of ways the company has incorporated innovation into its work in Zambia?

We have developed, for example, partnerships in ready-mix concrete to develop special concretes that had been rolled out in France or in the USA and that were completely unknown here. Pervious concrete, for example, is a draining concrete so when you have very strong rain in a very limited period of time, the water goes through and it means you don’t have the streets flooded, if it is properly done. This is a big problem here obviously. The rainy season is has now passed but if you were here two months ago you would have seen a lot of streets in Lusaka completely flooded so the pervious concrete allows you to take care of some of that water.

We have also launched with our partner in ready-mix, Brunelli Construction, self-compacting concrete, which is also very common in France or Spain and is not as labor intensive. The finish is also much better when you pour the concrete because it levels itself. These are just two examples but we are looking constantly at the sort of innovation that we can bring to this market. Obviously the construction market is still relatively small and not many construction companies have the expertise to apply the new innovative solutions that we can see in other markets so we have to go step by step. What is very helpful is that we have that a pool of innovation that we can tap into when we think the time has come. We have plans over three years and have decided already in our marketing plan where to focus first. The current focus for example – and I have a meeting coming up with companies from Canada and Uganda - is mining. We are leaders in the mining sector from a construction viewpoint as in underground mines you have to consolidate the inside and you do that with shotcrete, which is a type of ready-mix that you spread. We are one of the very few companies that have global experience with mining and we have won a couple of big contracts for example in the Democratic Republic of Congo where there is a lot of mining and the construction sector is still relatively new. 

Despite increased competition and falling cement prices, Lafarge Zambia is doubling capacity at its Lusaka plant in a 200 million-euro project. Do you have any further plans to expand/diversify?

We are constantly looking at opportunities. There are new players that have plans in these markets and I think we need to move faster than them so we also increased our capacity in Ndola to make 42.5 with a view to consolidate our market share in DR Congo. When you look at Lafarge Zambia it’s important to bear in mind that we are also the leader in Katanga, and Katanga is a key market for us and in fact I am also in charge of that region. As you can see Katanga is almost part of the same zone from a logistical viewpoint and from a people view point, the two economies are tightly together. So a lot of our expansion in the future years will be driven by the fantastic growth that is also taking place in DR Congo.

In addition to the country’s mining sector and private developer segment, Lafarge Zambia works closely with the government in the road and power sectors to make its cities more compact, more durable and better connected. How would you like to further strengthen Lafarge Zambia’s relationship with the government in future?

I think where there is key value in partnering with the government is in concrete roads. Part of the problem with the current road sector is the huge amount of funding that goes into renovating roads. The road network from Zimbabwe up to DR Congo is really the lifeline of southern Africa so you have goods coming from South Africa moving all the way up to Congo and on the other hand the trucks with copper driving down. That’s a lot of truck traffic in a typically very hot environment, so you have got lots of trucks travelling at a low speed in high temperature environment, which is not good for asphalt. Essentially what I have seen is that a lot of roads suffer immensely with the stress that truck traffic places on their structure. The solution is concrete roads. There has been in the past a lot of obstacles, one of them being the cost of the solution, which prevented the Road Development Agency from moving forward. Now, even from a cost view-point, the problem is largely solved so what we need is to find road construction companies that have the expertise to build such concrete roads. There are a lot of them even in South Africa but essentially this is where the road network can change completely in the next 10 years because low speed, high load and high temperatures are exactly the conditions you have for concrete. This can last for 20 years instead of having to re-do the road completely every four or five years.

During our interview with Ambassador Cohet, he stressed that President Lungu’s visit to France aimed to strengthen diplomatic ties with the country and then bring more French investment to Zambia, which today represents just 1.5% of total FDI inflows. How can Lafarge Zambia help to expand the country’s investment portfolio?

We can help by supporting other related industries as they move into Zambia. I think particularly large constructions companies in France and companies in construction related sectors, particularly precast and technical precast. We have set up two industrial parks - one is around this plant and the other is in Ndola. We have a lot of land that we have marked for industrial development so our idea is to bring partners to Lusaka and Ndola who use our products in different applications, and who can take advantage of the tax conditions that we have created, and of course the land. That’s really an area where we would like to move forward. Having worked for Lafarge in France for a number of years, I know that there are a lot of industries that would find a market here. There is just a gap that they need to cross because sometimes they don’t have the international structure and we can help them. Ambassador Emmanuel Cohet is completely correct, there is a huge potential for Lafarge Zambia to bring other industries here.

Your career with LafargeHolcim spans more than 15 years and has taken you from the USA to France to England and most recently to Zambia. Given your wealth of experience in this company, what vision do you have for Lafarge Zambia over the next 6 to 12 months?

Well the next six months are not going to be particularly easy so to keep things together is my vision primarily. But once things are a little clearer both from the political and macroeconomic sides, we will have more clarity in terms of public funding and also a good road map with the International Monetary Fund, if that’s the choice of the Zambian government. Things can turn for the better really quickly and we have to be ready for the rebound. We are in a really depressed environment and the challenge is for us to adjust our cost base, diversify our sales – particularly in the export market - and be ready for the next phase, because I am convinced that there will be again high growth in Zambia. We just have to sit tight for probably 12 to 18 months and then move on with the market, and we will reap the rewards just as we did after our first investment in the Chilanga plant after 2008.

The readers of L’Express include many of France’s most influential political and business leaders. What final message would you like to send them about investing in Zambia as well as Lafarge Zambia?

For me the main message is that when you invest in Zambia, you don’t invest just for the Zambian market. Therefore, you can really take advantage of very favorable conditions, you can negotiate attractive tax incentives when you first move in to invest and if you operate in a responsible manner, you can really grow your operations in Zambia very profitably with a view to serving other markets. DR Congo is a prime example, of course, it is volatile but it is also a massive market. The population is estimated to be around 80 million and the country has extremely large natural resources, and it is true also for Mozambique or Zimbabwe. Zimbabwe is a country that will move in a better direction in the next few years. So you see that there is pent-up demand in all these markets that can be served through Zambia. So essentially the message is that when you invest in Zambia, you don’t invest just for the Zambian market but you take advantage of what Zambia can offer, which is in a way the best of both worlds.