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Forget about ZISCO reopening; give small-scale iron and steel miners concessions

After so many failed attempts to resuscitate ZISCO, it seems the once massive steel producer may never rise again. The only option is to give iron and steel concessions to small-scale miners so that we can have meaningful contributions, as the case with gold.

Features Editor – Wednesday 9 January 2019

ANALYSIS (Mining Index) – THE 3rd of August 2011 witnessed the re-birth of New Zimbabwe Steel, former Zimbabwe Iron and Steel Company (ZISCO) through massive capital injection by Essar Global, an Indian conglomerate group that undertook to recapitalise the steel force owning a 54 percent stake in the venture financed to a tune of US$750 million.

The steel giant had ceased operations in 2008 owing to operational challenges that affected over 3 500 workers in the Midlands Province.

By 1984 ZISCO was the largest foreign exchange earner in the manufacturing sector with 80 percent of its products destined for exports.

Today, it is projected that ZISCO revival will contribute 60% to Zimbabwe’s foreign currency earnings. Instead of lying idle for over a decade, government need to consider how small-scale iron and steel miners can bring life to Zimbabwe’s steel industry.

A small plant with an annual capacity of 500 000 tons costs around US$125 million in India. It would make sense to have more smaller plants with different owners (both local and foreign investors) than not produce at all.

Zimbabwe has lost a decade of iron and steel. It would be better to find investors for smaller plants, then consolidate operations at some point.

In 2004, it was estimated that Zimbabwe had lost over US$20 billion in potential revenue since its closure in 2008.

In October 2013, former minister of Industry and Commerce Mike Bimha assured the nation that ZISCO Steel was scheduled to re-open before end year.

In February 2015, former vice president Emmerson Mnangagwa announced that plans to reopen ZISCO were at an advanced stage, as stipulated in ZIMASSET’s priority list, indicating his expectations to chair a meeting between Essar Africa and government officials to ironed out sticking points.

In December 2016, Bimha announced that the resuscitation of Ziscosteel had taken a giant leap forward following the ground breaking ceremony of a coke plant at ZISCO worth US$133 million to revive ZISCO’s coke plant and fully capitalise the project which was expected to begin operations within a month.

In August 2017 former president Robert Mugabe met R&F Company president Mr Zhang Li, a Chinese investor after securing a US$1 billion investment and signing an implementation framework for ZISCO which was expected to produce one million tonnes of steel within 18 months.

In October 2017, Bimha reiterated government was in final stages of concluding the implementation of the ZISCO with R&F Company.

January 2018 witnessed government announcing its plan to resurrect ZISCO within the first 100 days of Emmerson Mnangagwa’s presidency which saw the government gazetting the ZISCO Debt Assumption Bill in January 2018, assented by the president in May 2018.

ZISCO owed US$211 912 400 in external loans, US$6 095 620 to external suppliers, US $57 696 085 in domestic loans and US$219 113 219 to domestic suppliers, utilities and statutory obligations, bringing the total debt to US$494 817 324 million.

In July 2018 Bimha once again announced that ZISCO would be reopened in phases as it is going to assume a different investment structure.

Serious looting has been reported at ZISCO, worsening investment opportunities for the defunct giant.

Economic analyst Eddie Cross lamented on continued corruption at the steel company saying most of its infrastructure, equipment and spares have either been vandalised or looted over years of the company’s redundancy, and the best option would be to raze the current structures to the ground and start afresh.

“The chairman and board of ZISCO Steel who have failed Zimbabwe completely in the last twelve years are collecting scrap steel and slag from the site, worth a million dollars a month and they are pocketing it in their pocket.”

“They are steeling scrap which they are selling to South Africa for US$86 per tonne. You go to ZISCO today, I was there the other day, there is no one electric motor left. These guys gave spent 12 years just stripping the plant,” he said.

The nation is yet to see if Finance Minister Mthuli Ncube’s Transitional Stabilisation Program, who has also reiterated earlier pronouncements of reopening of ZISCO, saying government has already signed an Asset Purchase Agreement with a potential investor who is ready to invest at least US$1 billion to restart operations, will finally bring light to the sleeping giant.

In March 2018, chairperson of the Parliamentary Committee on Mines and Energy Temba Mliswa said it was not advisable for government to pursue ZISCO revival, saying the US$1 billion needed is worthy invested in a new viable project.

In October 2018, Industry and Commerce Minister Nqobizita Mangaliso Ndlovu said he was hoping his visit to China would help finalise the ZISCO deal, noting that government was not happy with the progress by R&F.

Known reserves of iron ore are estimated at 3 700 million tonnes, iron content of between 40 percent and 62 percent located around Zvishavane, Kwekwe and Harare. Iron ore reserves at Buchwa and Ripple Creek are estimated at 20 million and 70 million tonnes respectively and iron contents of the two deposits are 61 percent (Buchwa) and 54 percent (Ripple Creek).

With such vast, lucrative deposits, there was a scramble in 2010, to invest in ZISCO which saw 12 companies racing to bid for recapitalisation.

Jindal Steel, Sino Zimbabwe, Essar Africa Holdings Limited (EAHL), Sovereignty Capital, Arcelor Mittal, China Metallurgical Group Corporation, Arcadia Steel Energy and Mining, Apollo Steel, Zimlantic Export & Import (Pvt) Ltd, Posco, AMC Corporation and Murray & Roberts took part in the bidding process and in November 2010, EAHL won the bid.

The sticking point came when EAHL and government failed to agree on the implementation and ownership of mineral claims of Buchwa, Mwanesi, Ripple Creek and Bimco iron ore deposits leading to the collapse of the deal.

After so many failed attempts to resuscitate ZISCO, it seems the once massive steel producer may never rise again. The only option is to give iron and steel concessions to small-scale miners so that we can have meaningful contributions, as the case with gold. ENDS//

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