Good morning, everyone. Welcome to PPC's H1 of FY 2023 Results Presentation. My name is Kwame Antwi, I'll be your emcee for this afternoon. As usual, we're hosted by the group executive team, led by Chief Executive Roland van Wijnen. The team will take us through the results presentation, thereafter, we'll open the floor for question and answers. In terms of the format, we have a webcast, you can type in your questions at any moment during the presentation. The team will collate the questions, we will pass it on to the team during the question and answer session. Without taking too much of your time, let me hand over to Roland.
Thank you very much, Kwame. I don't need the mic. I'm micd up. Good morning, ladies and gentlemen. It is a pleasure to present to you the First -Half of Financial Year 2023, together with my colleagues of the Executive Committee. After a brief introduction, I will hand over to Brenda Berlin, our Group CFO, who will talk through the financial results. We look at the individual countries in which we operate. Njombo Lekula will take you through South Africa and Botswana, followed by myself to talk about Rwanda. I will hand over to our MD Industrial and Innovation, Mokate Ramafoko, who will take you through Zimbabwe, as well as the section on industrial excellence and decarbonization.
After that, I'll still bring it to a close in a summary and an outlook, and then we are open for the Q&A. In terms of the introduction, I'll give you a brief overview of the industry in the various countries where we operate. If we look at our core market, South Africa, we have seen a recovery of the cement demand in the coastal area, especially the Western Cape, Eastern Cape. We had expected this. On the back of a relatively weak first -half last year, still heavily impacted by COVID, those provinces, including the Southern Cape, have bounced back. That has compensated a lower demand in the inland area, provinces such as Gauteng, Mpumalanga, Limpopo.
An area where, as you know, there is fierce competition amongst the players of the industry. We have seen expansion of cement demand in line with our expectations in Zimbabwe as well as in Rwanda. Energy costs have increased. We have indicated this earlier already. Following the uncertainties in Europe and the war in the Ukraine, fuel, electricity, and coal has all increased by double digits. Our focus has been on fighting those inflationary cost pressures, and we'll give you examples on how we have successfully been able to do that. Cement imports have declined on the back of a weaker rand and logistic constraints in South Africa.
However, imports remain a concern for us as their unstable and erratic supply into the market is disrupting. State-owned enterprises, especially in South Africa, examples are Eskom and Transnet, are causing cost pressures to our business. We'll give examples on how we deal with that and how it has impacted us. Our focus areas in this industry have been and will continue to be to improve our operational performance and reduce cost. Cost is something that we have to a large extent under our control. We have stated that we want to maintain the market share in the South African markets, and we want to grow with the market in Zimbabwe and in Rwanda.
We have continued, and will continue to focus on reducing debt through the cash generation of the underlying business and prudent capital allocation. Whilst we do that, we continue to reduce the environmental impact of our business. We will give you examples how our capital allocation has a positive impact, both on our cost base as well as on the decarbonization of the cementitious products that we sell to our customers. One of our focus areas was to finalize the capital restructure that we have spoken about so many times over the last years. On a high level, in terms of outcomes, we have generated cash, and we have reduced our debt.
The reduction of debt will be unpacked by Brenda in her presentation. In all our jurisdictions, the debt reduction or the net debt increase has continued. We have improved the overall equipment efficiency of our main equipments, which has helped us to contain cost. I'll give you examples shortly, and both Njombo and Mokate will give further examples in their respective sections. We have seen a margin squeeze as the high inflationary pressures, especially on coal, on fuel, and on electricity, could only be partially mitigated by price increases in South Africa due to the competitive environment.
In Rwanda, however, we have been able to maintain, and as a matter of fact, slightly expand our margins due to the different market dynamics in that country. We're pleased that we continue to extract dividends from PPC Zimbabwe, demonstrating their underlying sound cash generation, which we expect to continue. We'll give examples on how our climate change strategy is starting to bear fruit. Finally, this will be the last time we'll talk about the capital restructure as we have now effectively deconsolidated our operations in the DRC, and we have sold our minority stake in Habesha, Ethiopia.
As I indicated to you, the performance of the underlying business remains sound, generating positive cash, enabling us to strengthen our financial position. If we look at the revenues, and we look at it excluding Zimbabwe, there is an increase of 9%. Zimbabwe, as it has been over the last reporting periods, is impacted by hyperinflation accounting. However, also operationally, the first -half of FY 2023, we had a planned kiln shutdown that we announced earlier that has impacted the volume sold in the Zimbabwean market. If we look at our group EBITDA, again excluding Zimbabwe, we generated ZAR 580 million.
That is a decline from last year, particularly due to the circumstances that we face in South Africa and Botswana. The outlook for South Africa and Botswana on the back of the recent announcement by SANRAL makes us optimistic. As we've indicated before, PPC is ready to supply any increase in demand as and when it comes. The group cash flow of ZAR 390 million will be unpacked by Brenda as well. As I indicated, we reduced our South African debt by ZAR 140 million. We will see that there has been positive impact from currency movements in those amounts as well.
The strong financial position is underlined by the fact that our group net debt has now reduced to ZAR 677 million by the end of September of this year, compared to slightly over ZAR 1 billion that we reported at the end of March 2022. As I indicated, we continue to extract dividends from Zimbabwe. A total of $4.4 million were paid in June. There has been an additional dividend decided by the PPC Zimbabwe board of $5 million, which we expect will flow into the accounts of South Africa soon. CIMERWA is now in dividend-paying territory as well after the deferred tax asset has been completely consumed by the end of September 2022.
It is therefore our expectation that CIMERWA will also declare a dividend at their next AGM, which we foresee to be in March next year. A lot has been said and spoken about the volumes that are a main driver of our underlying business. If we unpack these volumes and we look at the first -half of FY 2023, our cement sales has gone up by 2% compared to the pre-COVID period. We did see the dip during the lockdown impacting FY 2021 and the unexpected spike post the lockdown coloring FY 2022. If you look at it pre-COVID and currently, there is a small increase, which is reflective of the underlying investment climate and GDP growth of South Africa.
We look at our international operations, you see the continued growth path that, for example, Zimbabwe is on. Despite the fact that we had 13% less sales compared to the first -half of FY 2022 due to the planned shutdown, we were still selling 14% more compared to pre-COVID times. Rwanda is on a continued growth path. 22% up compared to pre-COVID, 11% up compared to the previous half year that, as you know, was still impacted by COVID lockdowns in Rwanda. Let me zoom in a little bit about cost and what we are doing to manage our costs, how did we manage to bring in the cost increases below inflationary pressures.
What you see on the right of this slide are benchmarks, external benchmarks for three of the main cost components for to produce cement. The first one is coal. If you look at the benchmark, the ASR benchmark for the same quality coal that we purchase, we see an increase of 60%. That increase has not yet filtered through to our business. If you look on the left-hand side, you see that we have taken this time to increase, for example, the use of what is called fine coal, a waste out of the coal mining industry, to replace the coal that has become more expensive.
We're also increasing the usage of waste to replace coal, not only in South Africa, also in the other jurisdictions. Another major element in our cash cost is distribution. Distribution, as we all know, is heavily impacted by diesel, that has gone up, according to the benchmarks, by 23%. Our work optimizing the distribution routes in cleverer ways, benefiting from backhaul where we can benefit from backhaul, has led our distribution cost to increase significantly below the 23% that you see on this slide as an external benchmark. Electricity costs for South Africa has gone up, as by NERSA, by 9.6% or 10%.
We have managed to completely absorb that in our cost by making sure that our electricity consumption stayed flat compared to last year, despite the fact that we are selling less to retail, more to industrial, which usually leads to a higher electricity consumption. With that, I will hand over to Brenda to take us through the financials.
Thank you, Roland. Good morning, everybody. Just to give you an outline of the presentation, I'll take you through revenue, costs, EBITDA, and tax. I'll then focus on CapEx and cash. I'm only going to deal with continuing operations, as the impacts of the discontinued operations are in the past and not relevant to our ongoing core businesses. In addition, I will consistently highlight numbers including and excluding Zimbabwe, as this entity's results continue to be distorted by hyperinflation. Starting with revenues, South Africa and Botswana cement increased period-on-period by 4%. This was due to a combination of volumes being slightly down by 2.6%, offset by average price increases of 5% and more favorable product mix.
Revenue for CIMERWA in Rwanda increased by 43%, with volumes increasing by 11% and prices by some 22%. In addition, the Rwandan franc depreciated against the rand by 10%, further boosting rand revenues. Overall, the group's revenue, excluding Zimbabwe, increased 9% period-on-period. In Zimbabwe, revenue declined by 31%. Volumes were down 13% due to the planned kiln shutdown that Roland referred to at the beginning of the period. Even though Zimbabwe put through three price increases in the current period to offset input cost inflation, its revenues were affected by hyperinflation. Moving on to cost of sales. Overall, group cost of sales and administration, other operating expenditure increased by 6% period-on-period.
However, after eliminating Zimbabwe and depreciation, cash costs for the group increased by 12%. This increase needs to be seen in the context of both South Africa and Botswana and Rwanda increases. On the next slide, I'm trying to unpack this for you. This slide attempts to show the cost increases separately for South Africa and Botswana and then Rwanda, including volume and price increases, and therefore, the impact on EBITDA margin. As can be seen in the graphs on the right-hand side, revenue increased in SA and Botswana by 4%, but costs increased by 12%, resulting in margin erosion, with EBITDA declining by 29% period-on-period.
Rwanda was able to mitigate its cost increase of 35%, which was also due to the volume increases of 11 by good price increases of 22% to expand its margins and increase absolute EBITDA by 63%. Moving now on to EBITDA. This slide just summarizes the EBITDA by business units and depicts the relative size of each component in the pie charts on the right. We have already spent some time on SA and Botswana Cement in Rwanda. Materials was negatively impacted due to aggregate and fly ash volumes being down by 15% and 27%, respectively.
The last cost associated with the DRC restructuring was incurred by PPC International Holdings in the period. That restructuring is now fully completed and no more costs will be incurred in this regard. It is not actually shown as such on this slide, but group EBITDA, excluding Zimbabwe, decreased by 12% period-on-period and by 23% overall, once the impact of hyperinflation on the Zimbabwe EBITDA is included. Looking at the tax line, the effective tax rate shown on the face of the income statement is 79%. I would like to emphasize three points on this slide. First, the way PPC is structured does have an impact on its effective tax rate.
Rwanda and Zimbabwe have lower tax rates of 20% and 24% respectively, thereby having a positive impact on the effective rate. However, there are numerous expenses in those jurisdictions that are not tax-deductible in the ordinary course, resulting in a negative 8% impact. In addition, the group pays withholding taxes on dividends received from both Zimbabwe and Botswana, again impacting the tax rate by 6%. During the current period, the true effective cash tax rate is some 33%. Secondly, there's a large once-off item being a prior year over-provision from 2020 that was reversed. Lastly, there were several significant non-monetary adjustments or impacts.
Most of the deferred tax impact is due to the derecognition of a deferred tax asset in PPC Ltd. The ECL or expected credit loss impact is due to the non-deductibility of the ECL taken by PPC Ltd on its blocked funds. The hyper impacts in Zimbabwe also have a negative but non-cash impact of 10%. Touching on CapEx briefly ahead of cash flow. This slide depicts the trend of CapEx over the last three full years and H1 periods. We did underspend our expected CapEx in the six months, and we do expect a catch-up in the second six months to end the year at some ZAR 550 million, in line with last year.
Of the spend in the current period, most of it or some ZAR 120 million, was on maintenance. Our capital allocation principles remain that any expansion CapEx has to be value accretive for shareholders and, at the minimum, meet our WACC. Focusing now on the cash flow. This slide shows the waterfall of cash flows with the comparative period numbers shown below. PPC continued to de-gear across the group, which I'll show you on the next slide. What is noteworthy is that the group generated ZAR 319 million in positive cash flow before financing activities being essentially debt repayments.
The cash balance at the period end were positively impacted by ZAR 133 million, primarily due to the weakening of the rand against the dollar. I will shortly show you where the currencies are held across the group. After de-gearing, the increase in cash for the group in the period amounts to ZAR 189 million against ZAR 174 million in the prior period. The slide shows the movement in net debt from ZAR 1 billion at March 2022 to ZAR 677 million at September 30, 2022. In the first instance, the cash is added back to depict gross debt of ZAR 1.586 billion at the beginning of the period.
We reduced debt by ZAR 209 million in the six months, and ZAR 72 million is the exchange rate impact of translating Rwanda's debt, leaving gross debt at September 30 at ZAR 1.443 billion. South Africa and Botswana de-geared by ZAR 140 million in the period and ended the period with net debt of ZAR 935 million. Zimbabwe is debt-free and Rwanda has debt of RWF 371 million, which is all in Rwandan francs and is repayable by August 2024. Lastly, before I close, I want to show you where the cash is held in the group.
The left-hand side of the slide shows cash holdings by country, and the right-hand side shows cash holdings by currency, which shows that 54% of the cash is in US dollars and 25% is in rands. The US dollar cash holdings are in Zimbabwe and Rwanda, and all Zimbabwe's cash is in hard currency of either rands or dollars. To close briefly before I hand over, we remain very cash focused and the balance sheet is sound. Our costs are contained below input cost inflation, but remain a key focus, specifically on variable cost inputs.
On internal controls, we continue to make progress, but this remains an area of focus. Last but not least, prudent capital allocation and returns are a priority. Thank you for your time, and I'll hand over to Njombo.
Thanks, Brenda. Good morning, everyone. As we've already stated, our situation is really about the muted demand in South Africa and Botswana area. If we look at the cement demand, the coastal area continues to regain its volumes. As we've stated before, it was very slow in recovering after the COVID, so our volumes are getting back to their pre-COVID volumes, whereas the inland market is really facing a demand decline, and that's mainly due to the economic environment that we operate in. We've seen an upside in terms of the government's infrastructure projects that has been announced. However, the challenge that we still remain with is the slow implementation of those projects, specifically on the roads and infrastructure.
We have benefited from the weak rand with regards to the imports and also the supply chain challenges that has been faced worldwide. We've seen a decline in imports coming into the country and specifically benefited the Western Cape, as I will show you on the next slide. The poor performance of the SOEs is significantly having adverse effect on the business, specifically the unreliable power from Eskom and the Transnet poor performance. It's got a direct impact on the cost as we have to supplement the movement of materials from one site to the next.
In terms of our focal areas, we continue to focus on optimizing operations, and it's starting to pay its results, as well as the product sourcing, which has helped in mitigating the cost, as we have stated through Brenda and Roland. The clinker factor reduction has had a positive impact as well in terms of our costing. In terms of the fast-tracking of the use of alternative fuels, we've expedited some of the fine coal projects that we have in our inland factories specifically, and we are around an average of about 30% substitution with the fine coal, which has got a positive impact in terms of the coal usage.
In terms of the market share, we try to maintain our market share. This has resulted in us managing to contain the costs. However, the inflationary costs, because of the pricing, we have not managed to cover all the costs. We have seen an improvement in our overall equipment effectiveness, which then gives us that opportunity to be selective in which units we're going to run, and that has got a direct impact on our cost of sales. The reduction on the clinker factor is an outcome that we've seen, and that is in line with our decarbonization strategy, and that results in some cost reduction.
Whilst we've seen pressure especially in the inland area, we have managed to maintain our market share, and obviously, we've considered what other means we use to maintain that market share. Brenda has spoken quite a lot about the results in detail. Yes, we've seen a reduction in our revenue, about 4%, and a decline on our margins. That is impacted by mainly the fact that we haven't seen enough price increase to mitigate the increase in those inflationary costs. I spoken earlier about the decline in imports. If you look at this graph, you'll see that the cement has dropped in terms of the imports from last year compared to this year.
The bigger part of that drop, if you look at the slide on the right-hand side, has been about 77% of the drop is apportioned to the Durban port. With respect to the Western Cape, it's relatively flat in terms of the reduction. Obviously, if you look at the number on the Port Elizabeth, 85% of that is the clinker that has come in. There is a significant reduction in the imports, and that also speaks to the results in the Western Cape. Area of concern, obviously Mozambique and other Southern African like Namibia, there is a potential of South Africa being an import destination, and we're keeping a watch on that area.
I'll speak about our materials business, which has faced a weak demand because of the muted construction activity, and specifically the civil activity in terms of the Gauteng and inland region. We've seen an exit of many ready-mix players, owing to the economic conditions, and that has allowed us to gain a bit of market share in our ready-mix business. Last year, we had a very good year in terms of the ash, but now that demand is normalizing. Mainly because of, now we've got slag available, and that extender is a preferred extender, which then reduces the demand for the ash business.
In terms of the aggregates owing to the low civils activity, at the back of infrastructure that is not taking place, that has had an impact on the aggregates market and put the aggregates business into a bit of pressure. This is exacerbated as well by the power. The Eskom issues has got a very direct impact on the aggregates business with the load sheddings. However, the situation still remains. It's very easy to access business and therefore there is competition for the materials business. In terms of our focus areas, we've opted to focus on the specialized areas of the market.
We've made products that are niche in terms of providing the flooring solutions, and that has given us a little bit of growth in the existing market in that space. We've managed to optimize the pricing in areas where there's a lot of pressure in the market, and expanded our dolomite offering into the concrete business, which has done very well from a specialized rock in Mooiplaas operations. We've also focused on increasing the sales of classified ash, and we're also exporting ash to neighboring countries. In terms of the ready-mix, we've seen some growth even though it's very small on the ready-mix side. A significant decline in the aggregate sales volumes.
The ash is down, obviously, owing to the substitutes being improved. We've seen a very good growth on the classified ash in the ready-mix side. On the financials, yes, volumes on the ready-mix increased by 5% and the decline is mainly on the aggregates and the ash business. In terms of the revenue, we've seen some increase owing to good price, but EBITDA is on a loss compared to last year this time. Thank you. I'll hand over to Roland.
Thank you very much, Njombo. Ladies and gentlemen, allow me to take you through our business in Rwanda, CIMERWA. When you look at this business and you look at the right hand of the slide, EBITDA margin of 32.3%, volume is increasing, you might wonder, after you listen to Njombo, what are we doing so much cleverer in Rwanda that we're not doing in South Africa? The answer, ladies and gentlemen, is simple. It is nothing on our side. The focus elements that you see are exactly the same. We focus on increasing the volumes as the market grows. We need volumes also in South Africa.
Therewith, we have partially mitigated the inflationary pressures coming especially from coal. What are we doing in CIMERWA? The same as what we're doing in South Africa. We are replacing coal by alternative fuels. The big difference is that in CIMERWA Plc, the market structure allows us to pass on the residual element of the cost increase into our prices. We've increased our prices in local currency by 16% in May, when we were confronted with a higher cost. You can make a back of the envelope calculation on our financial numbers for South Africa. You will see something that I've said before. Cement in South Africa is too cheap.
Cement in South Africa, 50% more expensive, will give us good results for the cement business in South Africa. Looking forward, Rwanda is on a positive outlook. It also has the right actions from the government and the business. If you look at the percentage of fixed capital formation as part of the GDP, the number is significantly above South Africa.
That brings me to another point, the importance of big projects. In Rwanda, we're participating in the creation of a new airport, the creation of a new sports stadium, to give you two examples out of many. Our outlook for Rwanda remains positive. I'm thankful that I could take over this business from the good work that Mokate has done. He will speak about Zimbabwe.
Thank you, Roland, and good morning everyone on the call. I think we've heard what Brenda mentioned about Zimbabwe. Despite hyperinflationary environment in Zimbabwe, what we've seen is two things. One is very strong domestic cement demand. More importantly, what we've seen is increase in transactions in foreign currency. If you look at the transactions that we've made in the first-half, more than 70% of our sales in Zimbabwe, it was in foreign currency. The strong domestic demand in Zimbabwe is primarily driven by increasing infrastructure projects. As Roland mentioned, we're seeing a similar trend as what you see in Rwanda, very strong investment in infrastructure projects, but also to a large extent, individual home builders.
Our volumes, particularly in construction and CPI market has increased more than 35%. That's a very strong positive outlook with regards to Zimbabwe. Secondly, in the first-half, we've executed our kiln maintenance shutdown. That's really resulted in our decline in the volumes in the first-half, and also we obviously released quite a lot of cost to prepare this kiln for the future growth that we anticipate to happen in Zimbabwe. Unfortunately, the shortfall in the market was filled up by imports. If we estimate imports in the first-half to have taken a market share of close to 20%-26%, which is obviously a concern, particularly for our market in the north of Zimbabwe.
The other challenge that we faced in the first-half is the ability of the rail service provider to deliver product in the north, which is really one of the key concerns, because we've resorted primarily in road logistics to supplement the capacity of the rail service provider to take product into the north. On a positive note, Bernard mentioned we've had three price increases, which really in U.S, terms, our price increases have gone back to prior the introduction of a new currency in Zimbabwe, which is quite, quite positive. It's not reflected in our revenue numbers because of the hyperinflationary accounting, but also because the more you trade in U.S. dollards, hyperinflation tends to mute your revenue line quite significantly.
On the positive outcome as well, with the shutdown, what we've seen is reduction in our emissions. Zimbabwe kiln is now on par with all our units throughout the organization. We've also realized this, on a normalized basis, thermal energy consumption on the kiln in Zimbabwe has come down by 5%- 8%, which is quite significant, especially considering the increasing coal prices that we've seen globally. We believe that the plant is positioned to support the growing domestic demand. As Roland mentioned, I'm also pleased that Zimbabwe continues to reward investors with dividends.
The board of Zimbabwe in November again declared a $5 million interim dividend of about $5 million, which is quite positive. Lastly, looking ahead, we will continue driving operational excellence. I think that's quite key to support the growing demand, improve our margins, accelerate decarbonization. There are several projects that are underway in Zimbabwe, and we'll give you an announcement hopefully towards the end of the financial year on where we are with some of these projects, and continue to be to increase cash generation. With that, it will actually make sure that Zimbabwe continues to reward shareholders in South Africa and other parts of the world.
Ladies and gentlemen, I'll take you through our industrial excellence and decarbonization slides. As Roland mentioned, this is really quite a focus area for us. The first slide I'm taking you through is our kiln net OEE, that takes all the kilns in PPC and looking at how we are progressing with our kiln net OEE. As we mentioned, there are two drivers, and I'll take quality out of our net OEE. The two key drivers is net availability and our production index. If you look at half -year, our net OEE for our kilns has increased to 79% from 77%.
This is despite the fact that our Kolobong Kiln was down for almost six months, I mean, two months. We've seen improved performance of our SK9. That's been really a star performer in the first-half. Dwaalboom Kiln 2, following the shutdown, we've seen performance on par, even in most instances, exceeding the design performance. Also in Zimbabwe and other parts of South Africa, we've experienced a lot of power outages. Despite these power outages that mainly impact on your production index, obviously availability is taken out of our availability calculation. It's really a sterling performance considering all these challenges.
Looking forward, we'll continue driving operational excellence. There's a lot which is quite significant, considering the biggest contributor of our CO2 footprint is coming from clinker. We've done quite a few things. I think there have been operations that have excelled, as particularly Slurry. A lot of work has been done in making sure that our base product clinker is reactive enough to allow us to dilute it further without compromising the performance of the product. We'll continue doing a lot of research and development around this area to make sure that we can accelerate and continuously drive our decarbonization agenda.
On the thermal energy, Njombo mentioned a lot of work that has been done, particularly with the replacement of normal coal with cost efficient coal. Despite this increasing usage of other coal, we haven't compromised our thermal energy consumption. It has remained fairly flat. Despite also the lot of challenges that we've had with power outages, especially in Zimbabwe and in some other parts of South Africa, we've seen our thermal energy remaining flat. What we can see based on the recent performance, as I mentioned, in Zimbabwe, we're seeing a 5%-8% reduction on a normalized basis on thermal energy.
We've seen on Dwaalboom Kiln 2, our thermal energy normalizing to design capacity from the high ends that we experienced the prior year. Going forward, again, is to make sure that our operations, they deliver beyond the design parameters as far as possible. I thank you, and I will hand over to Roland.
Thank you very much, Mokate. Ladies and gentlemen, allow me to summarize and then conclude before we go into the Q&A. In summary, our focus on cash generation that we have had over the past period and the periods before continues to yield results, thanks to the sound underlying performance and therewith the de-gearing and reducing of our debt. Mokate and Njombo and myself have given you a few examples of measures that we implement to improve our equipment efficiency, to reduce our cost, and at the same time, reduce the environmental impact. I would like to take this moment to thank the thousands of colleagues of team PPC who are day in, day out, working to make this happen.
A cement business by its nature is very decentralized. We depend on what people are doing out in our operational site. There is no decision I can take sitting in my Sandton office that will reduce the cost. Thank you to everybody at Team PPC for making us a stronger company today. It is pleasing to say that we now have the flexibility to both benefit from an uptick in cement demand in South Africa because of the spare capacity that we can bring online. At the same time, having a strong financial position that allows us to withstand the current economic cycle if that were to be the developing scenario.
The outlook for Zimbabwe and Rwanda, as indicated by Mokate and myself, remains positive, with the expectation that we continue to expatriate dividends from those territories. In closing, our strategy remains the same. Running the company with the mindset of an owner. Running the company, focusing on those elements that we have within our control. Contributing where we think it makes sense to the broader topics. Prioritizing margin improvement over top-line growth that is uneconomical. One of the challenges of the South African cement business is that the industry is running behind its own tail.
If the market is not there, the volumes are what they are. We maintain our market share, and we increase our prices to make sure that we have a viable business for the long term. Our focus is on our Southern African assets, while we are managing the geographic footprint and supporting our business in the DRC that now is deconsolidated. Capital allocation is in line with those projects that are value accretive.
It is good to know that the decarbonization strategy of the cement industry in Southern Africa can go hand in hand with better financial returns, as all the projects that we have shared with you when we disclosed our decarbonization details are value accretive. I look forward sharing more of those details with you in the Q&A, and I close the presentation. Thank you very much.
Thank you very much, Roland and team, for a very insightful presentation. We now open the floor for questions. We've got a few questions on the webcast, and we're going to read them. Before we start, we've got a question from Joseph Davison. He's asking for the presentation to be posted on the website, and we just want to let him know that the presentation is already on the website. Over to you, Louise.
Thank you, Kwame. The first question comes from Chris Radebe of All Weather Capital. We have seen the recent infrastructure awards to Chinese firms. Please, can you comment on the likely impact on cement demand? Is there a risk that material could be imported from China to complete the projects? Perhaps a related question as well before we answer that one, comes from Mark Narramore of Excelsia Capital, and he has asked whether the localization policy still stands for SA infrastructure projects.
Okay, I'll take that one. In fact, as CCSA, we actually wrote to SANRAL to verify that they will be using local product. They gave us that assurance. The enforcement of that relies with SABS. They will be, obviously, through NRCS, they will be the ones that are imposing or making sure that it is local product that is being used. In terms of the localization policy, obviously, the procurement law has been challenged. I think we can rely on the assurance that we got from SANRAL that they will be using local products.
Thank you, Njombo. The next question from Mark Narramore of Excelsia Capital. He's asked if you expect a stronger second-half in Rwanda at an EBITDA level.
Thank you for that question. I'll take it. I expect a stronger second-half in Zimbabwe. Rwanda contributes now about $14 million EBITDA. The second-half it should come to similar levels. We're running the plant at capacity. We do need to take it down for a little maintenance. All in all, I expect that Rwanda continues at this high level EBITDA margins around about the 30%, and that we get a little bit better out of Zi mbabwe in the second-half.
Thank you, Roland. The next question, also from Mark Narramore of Excelsia Capital, another one from Charles de Villiers from Ashburton will follow. Over to Mark's question: How does management think about a dividend policy considering the de-geared balance sheet? Charles' question: Given the improved state of the balance sheet and positive cash flow generation despite poor market conditions, would you consider implementing a share buyback in the coming year?
Brenda?
I'll take that. Thank you, Roland. We will definitely propose, as a management team, a dividend policy to our strategy and investment committee, and then to the board in March. For implementation thereafter, subject obviously always to market conditions. Our preference, given what happens in our earnings line, is that it won't be an EPS or HEPS dividend policy, but rather a cash dividend policy based on available cash and ratios. To answer the second question, we are definitely of the view that, although we will have a dividend policy, it will always be racked and stacked against a share buyback, depending on where the market is, and clearly where the share price is.
At the moment that looks like a much more attractive option compared to a dividend. Either way, we aspire to return cash to shareholders.
Thank you, Brenda. Next question from Chris Radebe of All Weather Capital: Is there an update on the ITAC application? Charles Bowles is also from Titanium Capital, has also asked one related to the SA operations. The outlook for growth in SA is muted, volume growth is not the base case. It seems, therefore, that SA Cement will be unable to deliver acceptable returns without corporate activity in the industry to rationalize the number of producers. This seems unlikely. Please, can you comment on how you see this evolving?
Njambo, if you take the ITAC.
Sure. Obviously, the ITAC application has been submitted. I just need to point out that is obviously the importers themselves are part of the challenging of those applications. We are awaiting the authorities to make an announcement in terms of what is next with regards to imports.
Thank you, Njombo. As for the outlook for growth in SA, if we work on the scenario that Charles outlined, and it is muted, the question is whether consolidation will solve the problem. Consolidation, in my experience, has never increased demand in a market, and at the end, the increased demand is what drives this. Ultimately, a successful cement industry in any country is dependent on fixed capital formation and the infrastructure projects. Consolidation depends all on a concept whereby two companies see benefits in coming together. That depends on the underlying valuation thereof. We always look actually at our portfolio and where we see opportunities.
If there are opportunities that will help us in lowering our cost base going forward, either through production cost, admin cost, distribution cost, and there is a business case, we will certainly act, and we'll let you know once that is the case.
Thank you both. Just a reminder to the audience to please post your questions in the question tab on the webcast. The next question comes from Charles Bowles of Titanium Capital. In terms of Rwanda, please, can you comment on reserves for the operation going forward? Is there a viable plan to expand reserves?
That's a very good question indeed. Our reserves have been pending about 15, 16 years since I arrived, three years ago, so we have bit and bit found a little bit extra. However, that seems to come to an end. Our current projection with increased output, after we implement further debottlenecking, is 14 years. We are actively scouting the surrounding countries, particularly the eastern DRC, where there are limestone reserves. Obviously, the current tension between DRC and Rwanda is not helping us. There are limestone reserves, so in that sense it is viable. We, of course, need to verify the quality of the limestone and the ability to set up the logistics to the plant in Slurry.
Thank you, Roland. There don't appear to be any further questions. I think we can close then. Thank you very much to everybody for joining.
Thank you.