Zimasco strikes deal with SA firm

DEBT-RIDDEN ferrochrome producer Zimasco has entered into an agreement with South African firm Portnex through which the latter will lease three of the company’s five furnaces.
This deal will help give a lifeline to a company that is struggling to stay afloat. However, there are fears that a marked increase in electricity prices will seriously dent operations. The Sandton, Johannesburg-based firm will switch on the furnaces on a phased basis with the first one expected to come on line on February 1. Zimasco recently applied for judicial management at the High Court.
Last week, the company’s general manager (Administration), Ms Clara Sadomba told The Sunday Mail Business that the deal is part of a mix of measures that are meant to restore viability.
“As part of various strategies aimed at ensuring the continued viability of the organisation, Zimasco has entered into a leasing arrangement with Portnex of South Africa, who will lease three of Zimasco’s five furnaces, with the first furnace expected to be switched on the 1st February 2016,” said Ms Sadomba. From the time operations were shut down last year, Government has been seized with finding a new investor.
Last week, Deputy Minister in the Ministry of Mines and Mining Development, Engineer Fred Moyo said a steep upward review of electricity tariffs will be a deal breaker.
“We have run around to find other companies that can find internal efficiencies in the production of ferrochrome and still run those furnaces.
“We expected that on February 1 (2016), the company that signs Zimasco should reopen one furnace; 1 April, the second one and 1 May, the third one. That will bring us back to three out of five furnaces, that is a reasonable situation. But they would have targeted that the 6,7c per kilowatt hour power reduction remains in force because, if it moves up, it could be a deal breaker.
“I am not speaking on their behalf, I am simply saying we moved the tariff down to 6,7c per kWh in order to keep this sector (ferrochrome) alive so if it (power tariff) moves up again, it’s a challenge,” said Eng Moyo.
Ominously, Energy and Power Development Minister Dr Samuel Undenge indicated last week that a power tariff increase is unavoidable as there is critical need to finance new electricity generation plants and to import additional power from regional power utilities such as South Africa’s Eskom and Mozambique’s Hidroelectrica De Cahora Bassa (HCB). The Zimbabwe Energy Transmission and Distribution Company (ZETDC), a subsidiary of Zesa Holdings, is selling power to most consumers at 9,86c per kWh while gold miners pay 13c per kWh. It is argued that the cost of electricity in Zimbabwe is way below the regional averages of 14c per kWh, hence the need to raise the tariff to almost the same level. Generation from Kariba Hydro Power Station has plunged from 700MW to 285MW due to declining water levels.
“The Chamber of Mines must be responsible enough to immediately engage Zesa if they have not done so, otherwise we have a challenge.
“We have to protect mining; agriculture is facing challenges and therefore manufacturing will depend on mining for raw materials,” explained Eng Moyo.
Agriculture usually supplies an estimated 60 percent of raw materials to the manufacturing sector. A brutal El Nino weather pattern sweeping across Southern Africa has resulted in erratic rains, leaving most crops across the country wilting.