eBusiness Weekly
Tapiwanashe Mangwiro
Zimbabwe Iron and Steel Company (ZISCO), has been left idle since it’s total collapse in 2008, and has been battling to find a suitable suitor, despite various deals and efforts to resuscitate the steel giant.
Government has finally settled on an investor – Kuvimba Mining House.
The mining house has won a bid of the biggest steel reserve in the region and sees itself benefiting from the company’s subsidiaries as the giant awakens.
The steel company owns Buchwa Mining Company (BIMCO), Lancashire Steel, ZimChem and Frontier Steel.
The new investor is expected to hand over 35 percent of the design, procurement and construction operations to local companies and residents as part of the deal. To entice new investors and remove litigation hurdles, the government took over ZISCO debt of about US$500 million in January 2018.
Acting Minister of Information and Broadcasting Services, Joram Gumbo said: “Cabinet is informing the nation that due process was undertaken for the identification of an investor to partner Government in the operationalisation of ZISCO. The standard process to find an investor/partner for ZISCO was undertaken under guidance from the Zimbabwe Investment Development Agency (ZIDA) and incorporated inputs from the State Enterprises Restructuring Agency (SERA).
Initially, nine prospective investors expressed interest, and after a review by the Executive Management team, four bidders were shortlisted. Following further, due diligence, the bidders were reduced to three. Out of the three, Kuvimba Mining House was recommended.
“Accordingly, Cabinet approved that Kuvimba Mining House be engaged as the Investment partner for the resuscitation of ZISCO. Kuvimba Mining House is a reputable player in the mining and metals sector, and has previously been involved in such projects and the cases in point are the recent resuscitation of Jena Gold Mine in Midlands Province and Shamva Gold Mines in Mashonaland Central Province, a process which has resulted in the remittance of dividend to Treasury,” Gumbo concluded.
ZISCO provided a lifeline to various companies in the value chain and industry. It remains the biggest missing link in the Zimbabwean economy. The company used to produce mainly for the export market, earning the country millions in foreign currency.
Critically for the local economy and employment creation, the company’s interconnection with ZimAlloys (for provision of ferrochrome), Hwange Colliery (for provision of coking coal), Shabanie-Mashava Mines (for the provision of heat insulation asbestos), National Railways of Zimbabwe (for the transportation of raw materials and steel) and Zimbabwe Electricity Supply Authority (for a direct supply link of electricity).
Various companies that relied on ZISCO for production purposes had to close, downsize, or switch to uncompetitive imports for survival. These include Sable Chemicals, ZimChem, Ripple Creek Mine, Zimasco, Steel Makers, Haggie Rand and ZimCast. Currently Zimbabwe imports steel and steel by-products worth over US$1 billion per year mainly from Turkey, South Africa and India.
The Ministry of Industry and Commerce addressed corporate governance issues at ZISCO. A full board of directors was put in place. It will lead the resuscitation of Zisco through identifying a strategic partner. The board immediately held its strategic planning session and identified that it needed US$360 million for resuscitation. Resuscitation of ZISCO will go a long way in establishing a sustainable engineering, iron and steel industry. It will have positive spillover effects to other sectors of the economy. Around US$1 billion will be saved with the revival of ZISCO.
Iron ore prices have gained over 25 per cent or nearly 28 per cent since the beginning of this year.
Fitch Solutions cited continued supply constraints from mining firms, especially Vale and Rio Tinto, whose production fell short of guidance as a reason for the rise in prices, which were further boosted by the Chinese demand.
Earlier this month, as prices rose to near US$150, the Chinese government cracked down on speculative trade, leading to a fall in the prices. China’s National Development and Reform Commission (NDRC) said it would send investigation teams to the commodity exchange and key port to look into iron ore inventories and trading in the spot and futures markets.
“In fact, we believe that prices will receive support from supply constraints and renewed Chinese demand strength in 2022, such that the annual average iron ore price for 2022 and 2023 will remain above pre-Covid-19 levels,” the research agency said.
On Chinese demand, it said it was more positive on China following a number of developments. “First, and most importantly, China seems to be looking at increasing its financial support to the economy in 2022, amidst weakening economic growth prospects driven by real estate sector weakness and strict Covid-19-related lockdowns,” it said.
