eBusiness Weekly
Oliver Kazunga
In a major development likely to slow-down gained momentum, DINSON Iron and Steel Company, says it is commencing steel production in Chivhu without a railway line linking it to key sources of raw materials and routes to major markets.
The firm said before the construction of a 50-kilometre railway line to link Mvuma and Manhize, the company will be moving bulk goods produced from its US$1,5 billion steel plant by road once the project begins production in June.
In 2022, Dinson and the National Railways of Zimbabwe (NRZ) were reportedly in talks to construct the 50-km railway line from Mvuma to the firm’s steel plant in Manhize.
But the track, which will connect from Mvuma to the railway line national grid in Gweru, is yet to be constructed a few months before the steel plant starts production.
The firm, which is one of the three local subsidiaries of China’s leading stainless steel manufacturer — Tsingshan Holdings Group Limited, recently announced in collaboration with the NRZ, the intent to construct a 50 kilometre railway line linking Manhize and Mvuma.
But the time the steelworks projects starts operations, Dinson has confirmed that rail connecting Mvuma and Manhize will not be there, and at the moment the company is transporting coking coal from Hwange in Matabeleland North Province to the plant by haulage trucks- a situation that is a cause for concern as the country’s road network is damaged.
Speaking during a tour of the Manhize steelworks on Tuesday, Dinson public relations manager, Joseph Shoko, said the organisation is presently mobilising major raw materials to the plant with over 50 000 tonnes stockpiles of coking coal already on site.
“By the time we start production, the proposed railway line will not be there and this is a long-term project and it’s very expensive.
“And with the time frame that we are left with, where we are saying production is likely to start between May and June and yet we have not started construction of the railway line, it will not be possible for us to have the railway line during that time.
“But for a first, we are going to start by using our trucks to transport the inputs and outputs to and fro the industrial area. . .so, we will start by using roads as a mode of transport,” he said.
In recent years, concerns have been raised over the poor state of Zimbabwe’s road infrastructure that has been damaged by haulage trucks transporting bulk goods for different industrial sectors due to inefficiencies by the NRZ, which is the country’s bulk transporter.
The country’s rail network covers 2 760 kilometres but over the years, the NRZ infrastructure has been worn out and sinking in some cases, risking some derailments.
The rail network accounts for a total of 64 cautions (equivalent to potholes in the road network), extending a distance of more than 254 km.
Consequently, the cautions adversely impact on the movement of trains by causing inefficiencies such as delays and hazards like accidents.
Over the years, NRZ has been knocking on the doors of many potential investors, pitching various investment projects in an attempt to modernise its services and operations.
NRZ, the Government and India in June last year penned a US$81,2 million deal in terms of which the Asian country’s RITES Limited, is expected to supply the Zimbabwe railway firm with rolling stock comprising 3 000 horsepower diesel-electric locomotives and high-sided open wagons.
And in the context of the freight volumes to be moved as a result of Dinson’s steel operations, it is imperative for the firm to transport its raw materials and finished products destined for the local and export markets by rail.
Touted as Africa’s largest integrated steel plant, in the first phase the project is anticipated to produce 600 000 tonnes of products and 1,2 million tonnes in the second phase before reaching 3,2 million tonnes in the third phase and ultimately five million tonnes annually in the final phase.
In the early stages of production, the Dinson steel project, which presently employs 1 500 people plans to produce pig iron followed by steel billets and steel bars before the end of this year.
By the time it starts production, the steel plant aims to increase employment figures to 2 500.
Production is anticipated to rise supplying a wide range of steel products to the Zimbabwean industry with direct employment figures at the steel plant reaching 10 000.
Net revenues are expected to be US$10 million during the first phase before rising to US$4,25 billion under phase four of production.
“We need to reduce traffic on our roads and we are actually targeting construction of a railway line as an option for bulk goods.
“In fact, our priority is to have a railway line joining Manhize to Mvuma, once you get to Mvuma you are now connected to the national railway grid.
“And the next step will be to establish a railway line from here which should be able to link with the Harare-Mutare railway line through Nyazura.
“At the moment, we have already started discussions and there is already a technical committee set comprising National Railways of Zimbabwe and Dinson so that we start discussions in terms of modalities, how do we get funding, and how are we going to start construction of the railway line,” said Shoko.
In a separate interview, economist Kipson Gundani said it is imperative for Dinson to transport its raw materials and finished products by rail instead of road for the company to enjoy the economies of scale while also reducing damage to the country’s road network.
“The first thing is it will become costly for Dinson because obviously they cannot move bulk goods by road as compared to rail. So, the cost of shipment and transport there will obviously increase, but more importantly there is an indirect cost to the nation through destruction of our roads.
“We are talking about heavy cargo here moving by road so there is also an indirect impact negatively to the economy or road destruction which should be a cause for concern actually because it then comes back to the taxpayer,” he said, adding that Dinson needs to construct a railway line as a matter of urgency.
Meanwhile, the Manhize steel plant is also anticipated to go a long way in reducing the cost of raw materials in the domestic market particularly in sectors such as construction that heavily depend on steel in the development of infrastructure.
The Engineering Iron and Steel Association of Zimbabwe (EISAZ) has indicated that since the closure of once the largest integrated steel producer north of Limpopo, Zisco in 2008 at the height of hyperinflation, the country has been spending US$1 billion worth of steel and related products annually from countries such as South Africa, India and China.
At its peak in the late 1990s, Zisco produced over one million tonnes of steel annually employing more than 5 000 people directly.
So far according to EISAZ, Zimbabwe consumes 1,5 million tonnes of steel per annum.
