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now New Zimbabwe Steel, should put such doubts to rest.
The economic recovery path, which Zimbabwee has been following, came to a climax yesterday, with the reopening of the steel giant.
The anticipated US$750 million investment by Essar, and the creation of 4 500 jobs, is a major mark on an economy that had been teethering under severe challenges for more than a decade.
This is a huge investment which will not only breathe life into the Redcliff-based steel company, but will have significant downstream impact that could help further improve the face of this country’s economy.
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Power generation, rehabilitation of rail infrastructure and the establishment of the iron ore beneficiation plant will certainly make a huge impact on the economy.
Its relaunch, superintended by President Mugabe and attended by Prime Minister Morgan Tsvangirai and a number of Cabinet ministers and their deputies, service chiefs and Members of Parliament, marked the beginning of a new chapter for the steel giant and the economy at large.
Such firms as Sable, which will supply New Steel with gaseaous oxygen, and many others that had had their operations compromised by Zisco’s closure will certainly benefit from its revival.
Last week Essar said it would source most of its raw material locally except in instances where they would not be available.
This means supplies of the many raw materials required in steel production are also back in business.
Steel is required in almost all sectors of the economy. Many firms had resorted to importing steel but the foreign currency will now be retained once Blast Furnace Number Four begins to fire.
The imminent return of Ziscosteel, which can best be summarised as the renaissance of a once sleeping giant that will transform people’s lives and the fortunes of the economy.
And the steel giant’s mining subsidiary, Buchwa Iron Mining Company – rechristened NewZim Minerals (Pvt) Limited – will play a critical role in the revival of supplying the critical feedstock into the steel making process.
Zisco ceased operations in 2008 due to burdensome debt and choking financial constraints, which were worsened by poor management.
Many contend Essar Africa Holdings – who bought 54 percent stake in the dormant steel giant – will have to almost start anew building the steel plant.
After years struggling to rejuvenate the firm’s fortunes through working capital support the Government decided to sell its stake to a private player with the financial wherewithal to bring Zisco back to life.
The once thriving State enterprise became one of Government’s most troubled entities surviving on handouts from the fiscus and the central bank in the fervent hope this would give it a fresh lease of life to turn around its fortunes.
But this was not achieved until the steelmaking giant went on its knees into what resembled an ancient industrial site littered with eyesores of rusty piles of scrap metal, ramshakable sheds and lifeless blast furnaces.
And with its demise the once beautiful and promising Redcliff City was affected by the contagion effect and slowly saw its fortunes and growth waning.
Thousands of people – as Zisco employed over 4 500 people at its peak of production – lost employment and source of livelihood and with no other major industry around Redcliff looked to suffer the same fate as Mhangura.
Even the most optimistic had lost reason to believe Zisco would ever regain its lustre or recollect itself to achieve any meaningful sustainable production.
But prospects of a better future and fortunes brightened this week as new investors Essar Africa Holdings line up to inject a whopping US$734 million to send heavy production smoke spewing out of
the furnaces.
Essar will do the nation and individuals a great deal of good. Nearly US$1 billion will be invested in what will certainly increase liquidity in the country.
As if that is not good enough, Essar plans extensive exploration of Mwanesi iron ore deposits to establish an iron ore beneficiation plant for the critical feedstock that will go into steel production.
According to Industry and Commerce Minister Welshman Ncube, the iron ore beneficiation plant will have capacity to process 25 million tonnes per year. He described the Essar deal as the investment of the decade.
This plant will increase the value of the iron ore from roughly US$15 per tonne to US$65 per tonne. Iron ore excess to Zisco’s requirements will be sold on global markets with inflows remitted to Zimbabwe.
Essar Group – the parent firm of Essar Africa – vice chairman Mr Ravi Ruia said if beneficiation proves technically and economically feasible Essar would invest in a 1 000-megawatt thermal power plant to support operations.
“We are committed to reviving Zimbabwe’s steel industry, adding value to both its natural and human resources and improving the infrastructure of the country to make contribution to the national economy,” he said.
This project is estimated to cost between US$2 billion and US$4 billion and result in the creation of more than 3 500 jobs during construction. Another 250 jobs will be retained at BIMCO (NewZim Minerals).
Communities in and around Redcliff will certainly be transformed and several downstream industries will sprout while existing ones will grow resulting in the creation of thousands of new jobs as the economy also recovers.
On its part, Government will have US$340 million in debts lifted off its shoulders in respect of foreign and domestic liabilities as well as fixed capital investment to revive the firm while it remains a significant shareholder.
Phase one will restore Zisco’s production capacity to 500 000 tonnes per annum within 12 to 18 months and this will be achieved at a cost of US$115 million.
The second phase of the plant refurbishment will raise production capacity to 1,2 million tonnes per annum and will cost an estimated US$275 million. The long-term plan is to reach output of 2,5 million tonnes.
Essar has also committed to restoring power generation at Munyati to optimal levels and any excess power will certainly benefit other consumers.
The Indian firm will invest significantly in rehabilitation of rail infrastructure, which is now seriously in a deplorable state and less efficient.
But the nation drives solace from the fact that Zimbabwe will be able to rebuild its industry and do all steel engineering using a diverse range of steel products made locally, as opposed to the current situation where they import.
At the inauguration of the Zisco/Essar agreement President Mugabe said the transaction was a manifestation of Government’s policy on public private partnerships.
“This is an historic day that we must all celebrate,” said the President. He said he was particularly pleased the investment will transform Redcliff and Chivhu and create direct employment and benefit downstream industries.
He said Government wanted partnership that will bring technical know-how and financial capacity to process minerals into high-value products, but he emphasised the need to ensure local people benefited from it.
If Government had maintained a stranglehold on its stake in Zisco, but secured a partner for its rehabilitation, it would have been diluted in a short period due to the capital call obligations associated with the revival of Zisco.
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