Eddie Cross on what to do with ZISCO Steel

What do we do with Zisco Steel?

In the middle of the Second World War in 1942, the Rhodesian Government established the Iron and Steel Company that we now know as ZISCO at Redcliff just 14 kilometres from the town of KweKwe. By 1957 it was producing a quarter of a million tonnes of steel a year and at its peak, production was about 1,2 million tonnes a year. In 1990 its staff exceeded 5000 and it was perhaps the largest industrial undertaking in the country with four wholly owned subsidiaries – the Mining Company BIMCO, Lancashire Steel, Frontier Steel and the Zisco Distribution Centres. Its combined turnover must have exceeded US$1 billion a year.

In 1998, in an attempt to revive the company, it borrowed money from a Chinese company and the German Bank KfW GBMH in Frankfurt to update its blast furnace number 4 with a capacity of over 2000 tonnes of pig iron a day. However, by then the majority of the plant was obsolete and in addition the Company was struggling to pay its creditors and staff. In 2008, despite the investment in a new Sinter Plant and the attempt to rebuild blast furnace number 4, output slumped to 12 500 tonnes of pig iron and the plant was virtually shut down.

By 2010 the total debts of the Company were over US$500 million with domestic liabilities rising strongly with unpaid salaries and service charges. The Government stepped in and invited bids to take up two thirds of equity, leaving the Government with a shareholding along with some minorities that had remained from the heydays of the company’s operations when the private sector had held the majority of shares which were quoted on the local, South African and UK Markets.

Several international firms looked at the proposal but eventually it was the Indian Steel giant ESSAR that made an offer that was acceptable to the State. This was signed by the President in 2011 watched by the Prime Minister and other Ministers and dignitaries. The deal was estimated to be worth US$10 billion with ESSAR paying the Government US$750 million to clean up the Zisco balance sheet and then investing nearly US$3 billion in a new plant next to Zisco and another US$7 billion in a bulk iron ore complex at Chivu.

By 2015 the deal had virtually collapsed, iron ore prices had declined in the previous two years making the Chivu project unviable and the Company had always argued that the Zisco Steel investment was a second rung option. By the end of the year, ESSAR had withdrawn from the country after spending US$60 million on negotiating the transaction.

In this period, Chinese steel companies had steadily increased their domination of the international steel industry. The steel industries of Europe and the USA and even South Africa were in steep decline, unable to compete effectively with the Chinese. It was to the Chinese that the Government and the Zisco Steel Company turned and in the next three years several companies showed interest and then withdrew. The consensus of all these players was the same – Zisco Steel in its present form was not a viable entity and could not be recovered. The longer term problem was that building a new plant, with say 2 million tonne capacity in Zimbabwe did not look like a viable enterprise. Internationally steel is produced in massive plants producing many times this volume and the cost and risks associated with such an investment on this site was simply not an option and could not succeed.

So what do we do with Zisco Steel Limited? It is a massive investment by this country, we import half a million tonnes of finished steel products a year and undoubtedly there is a market for steel in the region. We have ample natural resources to support such an enterprise. The problem is that it is an industrial dinosaur and its day is long gone. In most other countries these are termed ‘sunset industries’ and are abandoned, shut down and sold for scrap.

Continued next page

(324 VIEWS)