THE cost of Sable Chemicals’ proposed coal gasification project has risen to $700 million from $460 million over the last two years as the company struggles to court investors to finance the project, Government officials have said.
Acting Business Editor
Presenting oral evidence before a Parliamentary Portfolio Committee on Industry and Commerce yesterday, officials from the line ministry said negotiations were underway to ensure that the company abandons its production of ammonium nitrate through electrolysis by 2015.
Secretary for Industry and Commerce Abigail Shonhiwa said her ministry had been mandated to tackle 14 critical areas including rescucitating Sable within the short term in line with a new government economic blueprint, Zim Asset.
Director of Enterprise Development in the ministry Stan Mangoma said negotiations were underway to replace the company’s technology.
“The funding that was required was $460 million, but now it has skyrocketed to about $700 million and the commencement date is expected to be 2015,” he said.
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Sable, a company formed four years after the Unilateral Declaration of Independence is one of the companies that has struggled to produce efficiently due to antiquated technology. Nearly 44 years after its formation the company continues to manufacture ammonium nitrate through a process called electrolysis.
Mangoma said when the price of electricity changed in 2008-2009, the company requested government to provide the subsidy, but about six out of 14 of its units were operational. Government agreed to provide an annual subsidy of $11 million per annum.
However, government was unable to provide that subsidy and the company was unable to operate the 14 electrolysis units.
Government told the company to look for other cheaper ways of operating. Studies showed that the company had to migrate from electrolysis to coal gasification whereby it had to retire electrolysis units and extract ammonium directly from the coal.
Capacity utilisation in the manufacturing sector this year declined to 39% from 44% in 2012 due to a myriad of factors affecting the manufacturing sector.
Experts attribute this to capital constraints besetting the economy as well as unpredictable policy.
Mangoma said Sable had been established to provide ammonium to local fertilizer companies and operated on a subsidised price of electricity.