Is there still scope to revive Zisco?

WITH over a decade in comatose, debate has emerged on whether Zimbabwe’s largest integrated iron and steel plant, Zisco should be resuscitated or placed in a national museum.

Part of the arguments being put forward by those calling for the extinction of the Redcliff-based company, among other reasons, is that the steel producer has antiquated technology which does not in any way compete with the state of the art technology in the 4th Industrial Revolution.

The other point to take home is that Zimbabwe has a new steel plant with state-of-the art technology being developed in Manhize, Chivhu by a Chinese firm, Dinson Iron and Steel Company (Disco) under a US$1 billion investment.

Given that Disco, which is a subsidiary of China’s giant steel producer Tsingshan Holdings, is coming with the latest technology, the question has also been where will this leave Zisco as far as competitiveness is concerned?

The investment, which has already been accorded a national project status by the Government is expected to have its first steel blast furnace up and running by September next year.
On the contrary, some are of the view that Zisco is a strategic national asset and thus despite all odds, it must be resuscitated and contribute to economic development through employment creation and supporting local companies with iron and steel products.

Zisco ceased operations in 2008 largely due to mismanagement.

Since then the Government as the major shareholder of the defunct steel plant has on several occasions failed to secure a strategic foreign investor to revive operations at Redcliff.

Nevertheless, the Government announced early this year that Cabinet had approved the partnership between Zisco and one of Zimbabwe’s largest mining outfits, Kuvimba Mining House with interest in gold, platinum, chrome and nickel for the resuscitation of the steel plant.

Kuvimba has proposed to invest up to US$1,3 billion over three years to breathe a new lease of life into mothballed Zisco.

In the past, the Redcliff-based steel plant had become a subject of foreign investor interest with companies such as Essar Africa Holdings, a unit of India’s Essar Group having agreed to invest US$750 million into Zisco in 2011, during the era of the inclusive Government.

However, the deal collapsed in 2015.
Again in late 2019, negotiations for a US$1 billion revival deal between Zisco and R & F of China, which had shown keen interest to resuscitate operations at the steel plant also collapsed.

Speaking by telephone this week, economist and former Zisco board chair Professor Gift Mugano said given the state of technology at Zisco, that company should go into national archives.

“Zisco must go into the national museum because what we put into the national museum is something which we remember which we used to have. I am saying this because the state of technology and antiquated machines leaves no room for survival.

“There is so much more money which can be recovered from Zisco by selling the scrap than by restarting the company and also selling things like slag…anyone who wants to resuscitate Zisco should think of redesigning it as a new thing.

“And this something which l had when l was chairman that the team there should get experts from Germany where the technology came from so that they are able to say with this 4th Industrial Revolution which is going to be reflected on this (Disco) new steel company which is coming from China, we can have two companies in Zimbabwe going into the global market and selling these products at the same price,” he said.

Prof Mugano noted that there were dynamics that were taking place within the global steel industry and this called for firms that are competitive to be able to stand the hit within the world arena.

“The price of steel is going down and you need to be very competitive. This is one of the reasons why the Essar deal flopped, it was on the back of the global dynamics where you would see that the global steel prices are not quite attractive as hard precious metals.

“When Trump (former United States of America president) came into office, one of the things which he did is that he put a lot of restrictions on the trading of iron and steel between China and America; there was a trade war and that dampened the demand for steel because remember China is the biggest producer and if the supplier is constrained from supplying into the biggest economy, what happens to the price, it goes down.

And those are demand issues and remember America policy is not a Trump policy, the foreign policy is a foreign policy of the American.”

But also before it happened, Prof Mugano said trade was in the decline in demand for steel in favour of chrome and other minerals.

“For Zimbabwe now, our content of iron ore is not that high as compared to other markets like in China for example. Again you need to have higher concentration of ore and Zisco now with its current technology has no capacity to be competitive in the global market.

“So, if Zisco does not look at revolutionising itself from a technological point of view, it will be history. “I am not writing it off absolutely, l think we need Zisco but with a new reconfigured technology,” he said.

Another economist Victor Bhoroma said Zisco was technically and financially dead with most of its plant and equipment ranging from blast furnace, coking coal ovens to railway lines vandalised and dilapidated.

“So, Zisco is non-existent that’s the reason why you actually see that there is high level importation of steel and various steel products into the local market from South Africa and other Sadc countries. “Obviously, the setting up of the Mvuma steel plant will help reduce the level of imports provided the produce from that plant is going to the local market because part of the challenge that we see especially with investors from the Far East is that they invest locally but they already have markets outside the country.

“Otherwise to actually resuscitate the Zisco steel plant to the way it was, is not economic, so we would need to probably set up a new Zisco steel…but I don’t know whether we will be able to do that,” he said.
Bhoroma said the resuscitation of Zisco was a story that comes around after almost every two years and the Government has in the past highlighted that over 10 investors were going to resuscitate the steel plant at Redcliff.

Moreso, he said on account that Kuvimba Mining House does not have any exposure or experience in steel production, it still remains to be seen whether the revival of Zisco would happen.

“But that as it may, they (Kuvimba) can probably find a technical partner which is external to be able to do it (revive Zisco). But given the magnitude of the investment required, which is close to a billion dollars, I do not see Kuvimba having the financial muscle or capacity to fund that particular project. “For example, if you take companies like ArcelorMittal, they already have the experience for steel production and with their bank balance, they are able to do it.

“So, if Kuvimba partners an external investor maybe that works but in terms of us saying Zisco resuscitation is going to be implemented using internal resources, there is 50 percent chances that this may not happen taking it from past experiences,” said Bhoroma.

Another economist Eddie Cross said the objective of the Disco steel plant in Mvuma is to supply customers in Europe and the United States.
“And l don’t think its emphasis will focus primarily on the local domestic market in Zimbabwe or in the region.

“They may decide to do so if market conditions change elsewhere in the world, but at this juncture l think that their primary objective is to supply existing clients in Europe and America because they are closing down plants in China itself.

“The plants in China are older and they have decided to relocate their capacity to Zimbabwe.

“The Ziscosteel plant I think still has relevance and it has the capacity to be rehabilitated quite quickly and we could do it within a year and l don’t think it will cost that much,” he said.

Despite the existence of Disco in Mvuma, Cross said Zisco could provide a useful source of supply for basic steel products inside Zimbabwe.

“Our demand for steel is about half a million tonnes a year and Zisco could supply a majority of that . . . but the longer it takes to implement everything into effect and to bring Zisco back, the more difficult it’s going to be.

“It’s already 12 years since it closed and every year that goes by, the plant deteriorates.”

Zisco board chairman Engineer Martin Manuhwa said efforts to revive the largest iron and steel plant were progressing well with the investor following the roadmap that has been agreed upon by the two parties.

“We will certainly give feedback at the right time. We are just at the preliminaries, engagements, contractuals and we are setting up teams and things like.

“In fact, Zisco’s major importance is that it is our own steel plant and it’s a strategic national asset in that really it should be in the hands of Zimbabweans and as such it can anchor our economy to kind of import substitute as well as grow the labour market and many other things because it drives down to more value chains,” he said.

Regarding its capability to stand competition from the Dinson steel project Eng Manuwa said competition was always healthy as far as they were concerned and Zisco should be part of Zimbabwe’s economic signature.

“Zisco has a significant ore body and it still has the capacity for restart and it’s already underway and we have a resolution from Cabinet to resuscitate it, which is exactly what is going on.

“So, it will really be misplaced for people to advocate for us to rely on imports or foreign steel plants. You know if you don’t have your own crops in the garden, you are always at the mess of those that supply you,” he said. – Business Weekly