Members of the building industry are reeling from the shock of a proposed 20% hike in the price of cement. This follows a double digit price rise in the past year.

The proposed price rise is likely to lead to a substantial increase in building costs. Stellenbosch University's Bureau for Economic Research (BER) warned yesterday that, together with higher interest rates, a weighty rise in the price of cement would contribute to building work being less affordable and would lead to a slowdown in demand.

Ultimately, this will have a negative effect on the economy.

Cement producers PPC, Alpha and Lafarge would not comment on what their price hikes would be yesterday. However, a number of concrete product manufacturers have said that PPC, for one, had indicated a 20% price rise in January.

The rise would not be applicable to all clients, because prices vary between clients and cement product types, but double-digit rises were expected all round.

The BER's Charles Martin said cement sales were on the rise for the first time in years, and that now would be considered an ideal time for cement producers to introduce substantial price hikes.

PPC and Alpha said their price hikes were based mainly on increases in their input costs, which were affected by the depreciation of the rand. Capital equipment and spares, for instance, were sourced mostly from the US and Europe.

PPC also fingered Spoornet's prices and inefficiency as contributing factors to rising cement prices. Colin Jones of PPC said problems with rail availability had forced the cement producer to switch to more expensive road transport in some instances.

PPC and Alpha said price shifts were not based on attempts to come in line with international pricing or to move towards import parity pricing.

Lafarge declined to comment on price strategy issues.

The cement buyers said the reasons given for the increases were reasonable, but 20% was beyond what could be justified.

Several cement buyers have also accused producers of continuing to operate in a cartellike fashion. PPC, Alpha and Blue Circle operated as a cartel until 1996, when it was officially disbanded. A price war ensued in an attempt by the producers to secure market share.