Price war with an established local plant

Critical — a 7.5% price fall takes the project return from 15.5% to minus 27.3%. An incumbent with written-down equipment can sustain a discount indefinitely against a start-up carrying R20.21m of new debt.

Compete on SANS certification and delivery reliability, never on price; contracted offtake of 40 to 50% before commissioning; a defined exit trigger agreed in writing at entry.

Managing director

Cement price escalation

Critical — cement is 29% of revenue from a concentrated supplier group and a 15% increase takes the return to minus 1.8%. Energy and carbon costs have historically been passed through.

Volume-based bulk supply agreement with a cap or notice period, negotiated before commissioning; dosage at specification; grow the block share where price carries the input.

Managing director

Sales volume shortfall and a slow ramp

High — cash break-even is 67.3% of capacity in Year 1 against a planned 66.0%. A 15% volume shortfall takes the return to minus 1.8%.

Sales manager appointed six months ahead of production; sample batch from the supplier demonstration plant; 40 to 50% of capacity contracted before construction capital is drawn.

Sales manager

Licensing, rezoning or environmental delay

High — interest accrues with no revenue. Industrial zoning and NEMA authorisation take three to nine months each and neither is within the developer’s control.

Conditional site option rather than purchase; only study and professional fees committed until both are granted; development finance application lodged in parallel.

Managing director

Construction and equipment cost overrun

Medium-high — a 15% overrun costs roughly two points of return on a project that clears its hurdle by none.

Fixed-price equipment and installation quotations with performance guarantees on output rate and unit quality; retention held until proven production.

Managing director

Contractor insolvency and bad debt

Medium-high — a single R400 000 default in Year 1 consumes a fifth of that year’s EBITDA. The plan carries a 1.5% provision as a deliberate charge.

Credit vetting before first delivery; individual limits set against observed offtake; system-enforced stop-supply; credit insurance on concentrated accounts; cash-and-merchant weighting during the ramp.

Finance manager

Debtor days stretching beyond 40

Medium — one day is R174 000 at Year 5 revenue, and a drift to 50 days absorbs R1.74m and exhausts the committed facility.

Credit control treated as treasury rather than administration; monthly ageing review; stop-supply on all accounts beyond terms.

Finance manager

Breakage and reject rate above plan

Medium — each percentage point is R540 722 of revenue at Year 3 volumes, more than any commercial initiative in this plan.

Handling training, curing control, pallet condition, stacking discipline and a daily reject count reconciled to production.

Production manager

Cement over-dosing

Medium — every 1% of excess cement costs R152 177 a year at Year 3 volumes.

Properly graded aggregate, calibrated batching, and a strength testing regime that gives the confidence to run at specification rather than above it.

Production manager

Machine downtime

Medium — the plant has a single production line and no redundancy.

Planned maintenance schedule, critical spares held on site, and a service agreement with the equipment supplier.

Production manager

Aggregate supply disruption or haul cost

Medium — aggregate is the highest-tonnage input and every kilometre is a permanent cost.

Dual supply quotations with delivered pricing; the site located between the quarry and the demand centre.

Managing director

SANS 1215 certification lapse

Medium — certification is the entire basis of the specified-supplier position and the barrier that excludes the informal sector.

Batch testing without exception; laboratory technician appointed before commissioning; certificate file retained for buyer diligence.

Quality technician