Ziscosteel, Chinese investors and Zimbabwe’s poor record for negotiating investment deals

Ziscosteel – a timeline of govt ineptitude

On Monday this week, government announced that Chinese firm R&F will invest $1 billion in Zimbabwe Iron and Steel (Ziscosteel), the latest attempt to revive the once the largest integrated steel works in the region which shut in 2008.

Below is a timeline of how this giant steelworks wound up in a pile of rust under the watch of an intransigent government that put politics, cronyism and corruption ahead of economic considerations.

1938 – The first commercial production of iron and steel begins after a group of businessmen in Bulawayo import an electric arc furnace with a capacity of 12 000 tonnes.

1942 – The Rhodesian Iron and Steel Commission (Riscom) is established at Redcliff, taking advantage of the deposits or iron ore and limestone.

1950s – Riscom is making losses, but its fortunes turn after the formation of the Federation of Rhodesia and Nyasaland opens up a larger market for its steel. A consortium of private investors, the Rhodesian Iron and Steel Company (Risco), then takes over the operation and the colonial government becomes a minority shareholder. Among the shareholders are Anglo American Corporation, Stewarts and Lloyds (SA) and Lancashire Steel (UK).

1960s – Risco becomes a key industry for the country as Rhodesia, after the Unilateral Declaration of Independence, looks for import substitution to counter international sanctions. By then, its work force is over 2000.

1980 – The company is renamed Zisco at Independence. It is now directly employing 5 500 people and some estimates say it employs some 50 000 more in support industries.

1984 – Zisco is now the country’s largest foreign exchange earning manufacturer and is top on the list of Government subsidies. The size of its subsidy is almost two percent of GDP.

1986 – The problems begin to show. An official enquiry into operations discovers “mismanagement, poor planning and nepotism” at the company. The report also finds that refurbishment of the steel works had already been lacking before Independence, and that further delays are making the plant more expensive to run.

1993 – Zisco’s blast furnace Number 4, which produces 70 percent of the company’s steel, breaks down. The company is now operating only at 30 percent capacity, and starts laying off workers. Domestic market flooded by finished metal brands from more efficient producers from the region as ESAP tariffs are more favourable to imported finished products than raw materials for local producers.

1994 – A Z$700m deal is negotiated with a consortium of British and French investors for the rehabilitation of Blast Furnace 4, a project that is to take 16 months.

1996 – A Chinese firm offers to do same job of refurbishing Zisco at a cost of Z$500m, and promises to do it faster. That same year, for the first time, a formal study is commissioned on privatisation of Zisco and Government’ sell-off of its 91 percent stake.

1997 – A new sinter plant is installed. The plant is meant to feed Blast Furnace Number 4 when it is repaired, but this never happens and the sinter plant remains a white elephant.

2000 – Zisco is operating without a fully constituted board and its blast furnaces were no longer functional while its plants and equipment was now obsolete.

2005 – Auditors discover money from the sell-off of Zisco’s foreign subsidiaries is missing. The National Economic Conduct Inspectorate hands Obert Mpofu, then Industry Minster, a dossier on corruption. Mpofu tells a Parliamentary committee that the dossier “contains names of my colleagues in the ministry, MPs and employees at Zisco”. But Didymus Mutasa, then Security Minister, later says the report “does not exist”. Mpofu himself then backtracks on his own words.

A report implicates Vice President Joice Mujuru, who is said to have received 30 000 litres of fuel from Zisco for her celebrations after she was elected vice-president a year earlier. Zanu PF got 30 000 litres of diesel and 30 000 litres of petrol for its 2003 conference worth BWP64 860 and P59 310 respectively.

2008 – Zisco announces it is stopping all operations.

Continued next page

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