Lafarge Zambia continues to supply projects up and down Zambia, its high-quality cement products a go-to solution for construction clients and contractors.
BUILDING A NATION
“Due to the turnaround needed, and now I am often awake with concern for our staff’s health and safety due to COVID-19, but I know we will prevail. I am confident about our future and our ability to weather the storm – however, it will be challenging.”
Jimmy Khan’s tenure as CEO of cement producer Lafarge Zambia has, by his own admission, not been plain sailing.
Arriving at a company already operating in an increasingly competitive industry, the onset of coronavirus through 2020 has brought about a wholly new set of complex challenges.
But it is a task that he and the organisation have embraced and tackled head on, this after a whirlwind 2019 which saw something of a remarkable transformation of the business, one which has laid the foundation to face the COVID challenge and emerge even stronger on the other side.
“The cement industry in Zambia has dramatically changed in the last five years, with two new competitors arriving in 2015 and 2018 respectively and a local competitor doubling production in 2019, meaning the market moved from being undersupplied to dramatically oversupplied,” Khan explains.
“This type of change is not normal, and it creates an industry shock that can have multiple short term impacts – price drops, position changes, brand impacts and talent leakages.
“I arrived at a very exciting time in January 2019 – our business was on a precipice with just two options. One, we downsize materially with restructurings and closure of plants; or two, we recover in 12 months and take back our leadership position. If we were not successful in 12 months, the group would not have an appetite to continue burning cash with a negative net profit.”
While innovation has been key to the revitalisation of the business, the core part of the plan involved going back to basics.
The company has streamlined over the last two years and currently has two cement plants and three kilns which provide 3,200 tonnes per day of capacity. Indeed, it is the only two-plant operation in the country, its sites at Lusaka (one million tonnes capacity) and Ndola (400,000 tonnes) providing a material strategic advantage in terms of logistics, as well as producing the widest product range on the market.
This network is supplemented by several delivery depots, 70 retail outlets (Binastore), and around 700 employees and a similar number of dedicated fleet drivers – a total of about 1,400 team members.
“I owe a very sincere thank you to our customers, our suppliers and transporters and, of course, the Lafarge Zambia staff,” Khan adds. “They have all stepped up. The work that has been done to turn this business around in 12 months is nothing short of spectacular, and none of this would have been possible without having each one of the three groups fully engaged.”
Indeed, the CEO is quick to further acknowledge the company’s people as the key point of difference in what is a congested market.
“Lafarge Zambia has a modern automated pre-calciner plant, but in our business, the cost and quality of production is a derivative of the people as much as the hardware,” Khan continues. “Our Lusaka (Chilanga) plant is new with a closed circuit ball mill, while our Ndola plant is more than 50 years old, but the cash cost is quite comparable and the standard deviation of the cement at Ndola is below 1.4 points, which is world class in terms of quality and consistency.
“With two new players coming in, we have had almost a zero percent loss of talent and only four expats in our business – truly, our people and teams are a dramatic differentiator in this market.”
The company’s people are also extremely well trained, with 2019 alone seeing more than 7,000 man hours spent on staff education.
And Khan himself speaks as somebody who has benefitted from training and mentorship. His time at Lafarge began in 2003 with the North American business, an experience which taught him the critical importance of company culture.
“Having a good manager was more important to me than anything else professionally,” Khan says. “Curtis Beckett, a quirky but brilliant manager, is where my journey started 17 years ago and he is probably why I am still at Lafarge.
“Over these last 17 years I have had fantastic managers and this is what has kept me engaged and motivated at the company. I quickly began to understand corporate life and culture and my curiosity grew.
“Lafarge is an organisation that allows a person to be curious about new areas and I knew I had to seize the opportunity. As a result, I always volunteered for the jobs that were either difficult or not many wanted to do, such as heavy travel, or confrontational by nature, like auditing. During those first 10 years I visited many countries with Lafarge, but the African countries piqued my interest the most.”
ADAPTIVE AND RESPONSIVE
And this curation of culture has come to define the success of Lafarge Zambia over the past two years or so, the COVID-19 crisis in particular highlighting the resilience built up in the organisation during this time.
Of course, the virus has had an impact operationally and commercially, but adherence to globally consistent safety standards and culture has enabled the company to keep disruption down to a minimum. Worldwide, LafargeHolcim has recorded very low infection rates compared to other industrial businesses of a similar size, an observation backed up by its external medical provider SES, which oversees hundreds of multinationals.
Khan reveals that Lafarge Zambia saw a 30 percent drop in sales volumes in Q2 2020, a trend which would have forced many companies to cut staff, benefits or salaries to make up the deficit. However, thanks to his team’s response, none of this has happened.
“We enjoy a healthy balance sheet and the turnaround measures completed in 2019 have helped Lafarge Zambia sustain through this crisis,” Khan explains.
“As of Q3 we are seeing a rebound and some level of normalcy. However, we are sending critical weekly messages to all members of our team that COVID-19 is real, and that we must continue our vigilance and safety practices.
“Coincidentally, we started investing heavily in digital solutions in 2019 and, due to COVID-19s arrival, many of those initiatives have been accelerated and turned into material successes overnight.”
These include the launch of two new applications, the first designed for customers to place orders, track deliveries, and check balances in real time.
COVID-19 has highlighted how electronic orders are practical and safe, and has accelerated the adoption of digital technologies across all aspects of life, and construction is no exception. Through a robust digital campaign in March 2020, the Lead Retail app has been a huge hit. Since its launch, over 85,000 tonnes of building materials have been processed via this method and online sales volumes have doubled.
The other application centres around an Uber Eats delivery-style partnership with a local startup.
“Our discussions began around cement bag delivery to end users within 90 minutes, as small as one bag to as large as 600 bags,” says Khan. “The initial response from them was quite apprehensive, and this was a wholly different idea for us as well.
“We offered to invest in their application to help develop a Lafarge Cement interface. Our target was to sell 500 bags of cement a month and get some positive marketing presence with end users. It has been three months and we have currently sold 27,000 bags, 35 percent being repeat customers, and have had an overwhelmingly positive response.”
Such has been the success of the scheme, the two parties plan to roll the service out in two more markets outside of Lusaka where it is currently available.
Indeed, innovation and adaptability are why the Zambia operation has been running for more than 70 years, the company also benefitting hugely from its membership of the wider LafargeHolcim enterprise.
The merger of two giants, Lafarge and Holcim, in 2015, the group is very much a global leader in all things building materials, its history dating back to 1833 when Lafarge was founded in France by Joseph-Auguste Pavin de Lafarge.
Later in the 1800s, Lafarge won what was dubbed the contract of the century when it became supplier to the Suez Canal in Egypt. Here, it delivered 200,000 tonnes of hydraulic lime needed to the build the piers.
Holcim is also well over 100 years old and carries enormous heritage, the Swiss firm being established in 1912 by Adolf Gygi who opened a cement plant in Holderbank.
Today, LafargeHolcim operates four major business segments all over the world – cement, aggregates, ready-mix concrete and solutions and products. To give an idea of its global scale, the firm employs around 72,000 employees across 2,300 sites spread over 80 countries, Zambia being one of them.
It also houses a vast amount of intellectual property, with some 170 patent families in its portfolio and 40 percent of such patents being related to low-carbon solutions.
Across the group, 2019 saw a net sales growth of 3.1 percent alongside a 4.3 percent increase in waste reused in operations and 5.7 percent decrease in freshwater withdrawn per tonne of cement made, a sign that the company is growing sustainably.
And the powerful network is only getting stronger, the worldwide group reliant on thousands of partnerships with suppliers and vendors to keep its operations running smoothly on a day to day basis.
In Zambia, Khan explains that the division operates one of the farthest average trips per truck in the entire LafargeHolcim group. It delivers 55 percent of its sales with a fleet of 700 trucks that between them cover 19 million kilometres annually, or around 800 kilometres per trip which is well above the industry average of 150 to 200 kilometres.
It is a huge undertaking, one which costs around $18 million a year, making fluid supplier relations of massive importance.
“This is absolutely paramount,” says Khan. “I spend about 30 percent of my week with suppliers, transporters and customers.
“Our top 10 transporters who represent 80 percent of our fleet are people who I know on a first name basis, have my personal number and are considered a core part of our Lafarge family. We have partnered together and brought truck turnaround times from seven hours down to 2.5 hours with a target to reach 90 minutes.
“Using our CSR teams, we have proactive communication with customers on deliveries and we are planning to integrate the truck GPS systems into our LeadRetail app so real time delivery on the truck is available to customers.”
CARING FOR THE COMMUNITY
The formidable heritage and resource base of LafargeHolcim is an undoubted advantage to the Zambian operation, as it is to all company divisions across the world.
Despite making a small loss for the year 2019, Lafarge Zambia has zero long-term debts and is therefore able to continue investing in the country, not only in its own operations but also the wider community in which it operates.
“Our community’s growth and prosperity lies at the crux of our organisation,” Khan adds. “We believe that when our communities prosper, we as a company are on the way to realising one of our greatest growth objectives: building a better Zambia for all and having health and safety as our overarching value.”
Indeed, this is a vital component of the company’s identity, shown by the tremendous variety of events and projects it donated to through the course of last year.
For example, it recognises the rich and diverse culture to be found in Zambia which includes a number of colourful cultural ceremonies. Here, Lafarge Zambia donated to the hosting of several key events through the Busoli Royal Establishments and Cuundu Cultural Fund, while it also sponsored the country’s Push Women Awards.
Wellness is another key strand of CSR activities, no better highlighted than by its Malaria prevention programme which sees employees’ homes fumigated and provided with mosquito nets, with further support given to charities to fumigate homes of other local families.
The annual Lafarge Lusaka Marathon, which has been running since 2012 in partnership with the Zambia Amateur Athletic Association, is another demonstration of wellness CSR in action.
“The last marathon held in 2019 featured the Republican President Dr Edgar Chagwa Lungu and the First Lady Madam Esther Lungu,” Khan recalls.
“The primary aim of the marathon is to promote athletes, wellness and fitness in the country. The funds raised through participation are distributed to various charities that Lafarge Zambia supports across the country, which includes Chilanga Mother of Mercy Hospice Chawama and Kabulonga Cheshire Homes, and the University Teaching Hospital-Cancer Disease Hospital.”
As well as financing and organising events, the company has donated cement to a large number of important community building projects, including several primary and secondary schools in Lusaka, Itawa, and Sianda, and road construction developments.
It has also donated 11 acres of land to the local Chilanga authority to build a new civic centre, as well as more than 75 houses to the Ministry of Education and Home Affairs to provide accommodation to teachers and police officers in the local area.
At the Chilanga plant, Lafarge Zambia often hosts community groups as it bids to keep close ties with local people, a feature which has been especially prominent during Zambia’s fight against the coronavirus pandemic.
The defining event of 2020, COVID-19’s global spread from the Chinese province of Wuhan has caused tremendous disruption, not least in lives lost but also economic hardship as a result of measures to try and contain the virus.
Almost everywhere has felt the ripple effects, and Zambia is no different as it bids to keep coronavirus at bay.
Here, as well as adopting stringent internal measures, Lafarge Zambia has invested heavily in the wider fight against COVID-19.
“Health and safety is a core value, therefore the health and safety of the nation is of great importance to us as Zambia is our home,” says Khan.
“We have therefore implemented initiatives in our communities in partnership with local government, district commissioners offices and the district health departments to ensure the health and safety of our communities during this crisis.”
Such measures include provision of branded vehicles with COVID-19 messages and public announcement systems for use in Chilanga and Ndola, and wide-reaching disinfection of public places in these two areas.
Further, the company donated 8,000 masks, 1,000 bottles of hand sanitiser and 1,000 bottles of hand soap to the Ministry of Health (as well as other supplies to charities) in a bid to boost personal hygiene, seen as key to helping prevent the virus from spreading among the population.
A SAFE AND SECURE FUTURE
The coronavirus pandemic has presented a challenge like no other to Lafarge Zambia, the year 2020 one of the most challenging and nuanced of all the 71 years the company has been present in the country.
In the midst of the transformation programme in 2019, the business celebrated its 70th birthday, a feat which has taught Khan the value of treating every day differently, and the paramount importance of not slipping into what he describes as autopilot mode.
“17 years ago, when I first joined Lafarge, I assumed if a company survives five years it is basically on autopilot, and the growth and progress becomes linear and continuous,” the CEO recalls. “However, being in an industry position where there are multiple fast-growing competitors, I have realised how naive I was.
“I now have a strong appreciation for Jeff Bezos’s observation that ‘every day is day one’. If we are not progressing forward and innovating daily, we are losing position and, in our industry, as with most heavy capital industries, position is critical.
“I believe it takes only a year or two of complacency or negligence to lose position in our industry and probably about five to 10 years to get it back, or potentially you never recover to the ‘glory days’.
“With that in mind, the 70-year mark is an exceptional achievement by the teams in Zambia. The longer those years of operation become the sharper we must be – Mia Hamm said it is easier to climb the mountain then to stay on top. If anybody perceives that Apple, Toyota, Google, Tata and Amazon find it easy to stay on top, I assure you they do not.”
And staying on top of the Zambian cement industry is exactly what Khan is determined to do moving forwards.
Thanks to constant innovation, challenging old ways of doing things and embracing new ideas, Lafarge Zambia is well-placed to supply any uptick in local demand.
The CEO signs off the conversation in buoyant fashion, stating his confidence that the market will continue to provide opportunities for growth and expansion.
“I read a lot of papers from economists and market experts to help me make the right decisions for our business and people,” Khan says.
“However, often I find that we overcomplicate things and believe that our strategic views have become very short term in the last two decades. There is an excessive amount of information and it can become overwhelming for many managers.
“I think in most of Africa there is the simple reality that for the next 30 years we will need agriculture, power and cement. There may be blips of overcapacity or supply demand mismatches, but overtime it will always even out. Investing in Africa is still the way to go for the next few decades – we just need courage and talent.”