Subsidy standoff cripples Sable Chemicals

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KWEKWE — A standoff between government and Zesa over the payment of $30 million subsidy for fertiliser manufacturer Sable Chemicals threatens the viability of the firm after its power was switched off in January.

Sable is the country’s sole ammonium nitrate (AN) fertiliser manufacturer.

The company, owned 51% by TA Holdings, has been without electricity since January 19 this year due to a $40 million debt owed to Zesa in unpaid electricity bills since 2009.

The power utility has since handed Sable Chemicals to their lawyers Masawi and Partners in an effort to force them to pay the debt.

Industry and Commerce minister Welshman Ncube told journalists in Kwekwe on Friday soon after touring the plant that the problems at Sable Chemicals were as a result of a standoff between Zesa and the fertiliser company over a government subsidy on power bills.

Ncube said government had failed to pay its share of the bill to Zesa forcing the power utility to pull the plug on the company.

“Sable Chemicals has paid Zesa about $9 million of its share of the bill since January, leaving about $30 million which is supposed to be paid by the government and because Zesa knows it is difficult to get money from the government, they have now descended on Sable Chemicals,” said Ncube.

The world’s biggest electrolysis plant consumes an estimated 80 megawatts/ hour of power. Sable Chemicals buys electricity at a government subisdised rate of 3c per unit instead of the commercial rate of 9c to run the power-intensive plant, while government is supposed to pay Zesa the difference.

Buying power at any rate above 3c would result in huge losses and the company would be unable to sustain operations without effecting a massive hike on the price of fertliser.

Ncube said Sable would continue to get a subsidy until the end of the year when the company expects to have raised $700 million for the construction of a coal gasification plant and do away with the expensive electrolysis plant.

“They will get the subsidy until December 31 after which they are expected to start operations of the coal gasification plant by January 2013,” Ncube said.

The country is currently short of AN fertiliser owing to the closure of Sable Chemicals and all the fertliser needed in the current farming season is being imported mainly from South Africa.