Feature: Zisco: The story of govt corruption

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ZISCO Steel Plant

BY TAURAI MANGUDHLA

Zimbabwe’S troubled steel production giant, Zimbabwe Iron and Steel Company (Zisco) has lost 14 years of production since its collapse in January 2008, with the knock-out punch thrown by power outages that fried its dated machinery.

Power outages amplified an already burgeoning crisis as Zisco had been crippled by mismanagement and unrestrained government interference, which saw politicians feast on its revenue at the expense of production.

Evidence of Zisco looting was llustrated in a report by Parliament in 2007.

But these was not all the hurdles that Zisco faced — lack of consistency and clarity on policy — which have also affected other firms, dealt a blow to the State-run firm.

Since its collapse, successive commitments of resuscitation through various structures centred on securing investors and technical partners were made.

But nothing has materialised as policy inconsistencies on the part of government and a macroeconomic environment generally hostile to business hindered progress.

Claims were made that corrupt officials scuttled several deals to resuscitate Zisco, including the most promising transaction that was inked with India’s Essar Holdings in 2011.

Hope of resuscitation of the steel giant after three successive power outages, emerged when Essar Africa Holdings (Essar) signed a deal to invest more than US$750 million to revive Zisco.

In 2015, four years after signing the deal, no smoke came from Zisco furnaces as consummation of the deal failed on account of sticking issues, including control of rich iron ore deposits at Mwanesi Ranch in Chivhu, this was despite the claims having been part of the original agreement and amounted to shifting of goal posts on the part of the government.

Soon after signing the deal, then Industry and Commerce minister Welshman Ncube was in the news, saying the initial investment in the insolvent company would be US$750m.

At the time, Zisco had debts in excess of US$340m including salary arrears of more than US$20m.

Ncube in 2011 was quoted saying Zisco’s value was estimated be US$40m and US$45m after years of limping and its eventual shut down at the height of a decade-long economic malaise in Zimbabwe that saw hyperinflation hit record levels.

The deal brought hope for industry as one of the country’s strategic assets, the steel plant, was expected to resume operations and provide the economy with raw material for a number of key infrastructural projects and boost foreign currency earnings through exports.

Apart from the strategic importance of the steel company, Zisco employed 5 000 people at its peak who could have helped stimulate economic activity with their monthly salaries.

The Essar deal is now history.

Government last month announced that it would partner Kuvimba Mining House, a company in which it has a 65% stake, to revive Zisco in a deal that requires US$1,3 billion capital injection.

All this while, workers struggled and the town of Redcliff became a pale shadow of its former self, with businesses struggling.

This comes after a long tender process in search of a suitor.

Kuvimba, according to the government, has three operating gold mines under Freda Rebecca, a gold operation; Trojan Nickel Mine under which are both in Bindura as well as the Darwendale platinum project operating under Great Dyke Investments.

The company also has a chrome operation, Zimbabwe Alloys Limited and has been short-listed among the players to get part of State-owned gold buyer and processor Fidelity Printers and Refiners.

Early last year Zisco moved to have some of its units running, according to board chairperson Martin Manuhwa.

The company had gone on the market scouting for top management to run Buchwa Iron Mining Company (Bimco) and Lancashire Steel.

Bimco and Lancashire Steel are wholly owned by Zisco, as well as Zim Chem.

Zisco said Bimco operated one iron ore mine, Ripple Creek Mmine and the limestone quarry situated next to the steelworks.

These operations supplied Zisco with iron ore, in the form of lump ore and fines, as well as the limestone required as flux for the furnace in iron and steel- making.

The company said Lancashire Steel manufactures rods and wire products for manufacturing and agricultural sectors. Zisco said Lancashire Steel operates 6 plants in the manufacture of wire products and has capacity to produce 45 000 metric tonnes of finished products per annum.

Manuhwa said between US$500m and US$1 billion would be required to bring the company to its former glory.

As Zisco counts the cost of government interference, Fortune 500 company Tsingshang’s massive steel and ferrochrome production plant is taking shape near Zimbabwe’s mining town of Mvuma.

The operation is expected to be four times the size of Zisco and is being established by Dinson Iron and Steel Company (Disco), which is a unit of Tsingshang.

It is on track to produce its first steel early in 2023, although officials say there have been significant delays due to COVID-19-induced hard lockdowns.

The deal was announced early 2021 and works to set up the furnaces and steel production plant have already begun with buildings emerging out of thick forests, where staff houses, warehouses and a cement mixing plant are nearing completion.

At peak, Disco’s operation will have capacity to produce five million tonnes of iron ore annually.

During a tour of the project, Disco public relations manager, Fanuel Utete said work to establish the first of the firm’s five furnaces was underway.

“On phase one, we will have five furnaces,” he said.

“At this stage, we will be producing 1,2 million tonnes of ore annually. But we will go further to operate 12 furnaces and produce five million tonnes of ore annually.”

Last year, Afrochine said the steel plant would sit on 2 000 hectares.

This will comprise a 1,5-kilometre long and 600-metre wide processing plant and mines.

Altogether the operation will turn over at least US$1,5 billion per annum.

This is good news for the markets.

But clearly, it is bad news for Kuvimba and the government.

“The Chinese plant will certainly take over the space that Zisco occupied on the domestic, regional and global markets,” said Tapiwa Sibanda, an analyst at Trade Winds.

He said the Chinese firm had funding to set up an operation that will supply steel to the domestic and international markets.

“In this game, size and consistency matters,” Sibanda said.

“It would be difficult for Kuvimba to resuscitate Zisco to its heyday. But while it will be trying to set up operations in Kwekwe, picking up the pieces and hunting for skilled staff, steel production would be underway at the Chinese firm, and once they take over the market, this would spell doom for Zisco,” he said.

“The market now knows that Zisco has problems, and once it tastes throughput from Chivhu, shifting to Kwekwe would be a difficult thing. In any case, the Chinese strategy is the best for Zimbabwe. Instead of spending money on the resuscitation of a firm that has failed, they are starting a completely new project, which has no legacy issues. If they do it well, I see the Chinese plant emerging as the new Zisco, supplying Africa and the global markets.”

˜This article first appeared in the Weekly Digest, an AMH digital publication