polished steel

Will Zimbabwe’s comatose steel giant Ziscosteel ever reawaken?

By Veneranda Langa

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Posted on August 9, 2023 07:33

Five thousand workers from the Ziscosteel Redcliff plant lost their jobs in 2015. (REUTERS/Philimon Bulawayo)
Five thousand workers from the Ziscosteel Redcliff plant lost their jobs in 2015. (REUTERS/Philimon Bulawayo)

Kuvimba Mining House, linked to sanctioned tycoon Kudakwashe Tagwirei, is the latest investor with a rescue plan for the former steel-making behemoth.

Local investor Kuvimba Mining House has taken over Zimbabwe’s comatose steel company Ziscosteel after getting a three-year bid to resuscitate it.

Ziscosteel – proudly described on its website as ‘once an iron and steel making giant’ – was mothballed in 2008 due to corruption and mismanagement.

The inactive company represents an estimated $14bn in lost potential revenue per annum, according to a report by the Zimbabwe Economic Policy Analysis and Research Unit on the steel industry. This in a country whose entire gross domestic product is was only $20.68bn in 2022 (World Bank).

Redcliff in ruin

The steel company, which used to produce 1.2m tonnes per year, had slumped to 12,500 tonnes in output by 2008.

On July 19, Kuvimba’s chief executive officer, Simba Chinyemba, told journalists at the Redcliff plant, 230km south-west of Harare, that the resuscitation of Ziscosteel is important to kickstart Zimbabwe’s economy.

“The revival of Ziscosteel is hinged on generating cash from mining operations and investing the proceeds to modernise the steel plant,” Chinyemba said during a tour of Ziscosteel by Vice President Constantino Chiwenga.

Redcliff residents are pinning their hopes on Kuvimba to resuscitate Ziscosteel after 5,000 jobs were lost, affecting more than 50,000 people indirectly.

Kuvimba roadmap

Kuvimba is linked to Sotic International, which is owned by business tycoon Kudakwashe Tagwirei, an ally of President Emmerson Mnangagwa who is under US sanctions.

The company started its operations to resuscitate Ziscosteel on 27 December 2022, says Ziscosteel chief executive officer Farai Karonga. He says Kuvimba will bring in $300m to the manufacturing operations at the steel plant.

The expectation is that Ziscosteel will become saleable to keen investors

“The Kuvimba roadmap is that they mine and sell iron ore to supplement their $300m [investment], and eventually change into organic growth and build the value of Zisco from what it is to the value of 1.3bn tonnes in three to five years,” Karonga says.

“Kuvimba’s plan includes that mining will be done by Bimco, and Lancashire Steel will do value addition of wire products.”

Bimco and Lancashire are Ziscosteel subsidiaries. Without disclosing who owns the remaining 9%, Karonga says the company is 91%-owned by the government.

Bimco’s portfolio will include mining limestone and other minerals at Ripple Creek, 16km from Redcliff, where there are huge limestone deposits, he adds.

“They will sell some to bring in money to resuscitate Zisco with a goal of bringing the project to a value of $1.3bn. The expectation is that Zisco will then be saleable to keen investors, with the main aim being to produce carbon steel,” he says.

Ziscosteel board chairperson Martin Manuhwa says the company can be resuscitated as a brownfield project.

The project entails constructing new iron and steel-making plants from scratch using the latest cost-effective and environment-friendly technologies in steel-making at a cost of $1.1m to $2.2m per tonne.

“As a brownfield project, investment to restore the integrated steelworks is estimated at $500m,” Manuhwa tells The Africa Report.

Current threats to Ziscosteel

However, Ziscosteel’s resuscitation will face stiff competition from the Manhize project in Mvuma, where Chinese miners Dinson Iron & Steel Company are on the ground.

With a $1.5bn investment, amid projections that this will be the largest iron and steel production company in Africa, the Dinson Iron & Steel project is huge. It targets 1.2m tonnes of iron ore annually.

Ziscosteel’s management say they are ready to compete with the company.

Redcliff residents are pinning their hopes on Vice President Chiwenga’s promises that Kuvimba Mining will successfully resuscitate Ziscosteel and create jobs.

“We have suffered a lot amid false electoral promises. With the coming in of Kuvimba we can only hope that Zisco[steel] will create jobs for young people,” Rodney Mbewe, a Redcliff resident, tells The Africa Report.

Former miners pick up scraps

More than 5,000 Ziscosteel workers who were fired on 31 December 2015 are still waiting for their pensions to be fully paid.

Torwood and Rutendo, the suburbs in Redcliff where most of the laid-off Ziscosteel workers still live, are in a sorry state after their residents lost their livelihoods. Some survive by picking up iron scrap and dumped coal to sell to small steel companies for $1 per kg in Kwekwe.

Redcliff is now a ghost town as 90% of its inhabitants depended on Ziscosteel

Anthony Nyashanu, president of the National Union of the Metal and Allied Industries Zimbabwe, tells The Africa Report that Redcliff is now a ghost town as 90% of its habitants depended on Ziscosteel.

“There is no activity, the old former workers are suffering, while the youngsters have resorted to gold panning, prostitution and selling scrap,” Nyashanu says.

He says only part of the former workers’ pensions were paid in 2019, when the government took over the company’s $500m debt through the Ziscosteel Debt Assumption Act.

Nyashanu says the pensioners were paid after the government had banned the use of the US dollars and designated the Zimbabwean dollar as the sole legal tender through a legal instrument, Statutory Instrument 142 of 2019.

“Their pensions were around $30,000 each, but they were paid in ZWL resulting in a loss of value of about $4,000. Some died before they were paid their pensions.”

Scavenger hunt

Redcliff legislator Lloyd Mukapiko says joblessness has caused many young adults to resort to theft. “The elderly former workers always ask for food handouts.”

Ziscosteel’s comatose state has also affected the town revenues, says Maxin Dabvu, a councillor for Torwood, Ward 1.

He says the council used to get 60% of its revenue from Ziscosteel and 40% from residents.

“Redcliff municipality gets water from Kwekwe town council, and now it owes Kwekwe $780m for water because the residents cannot pay,” Dabvu says.

Big business lost

Ziscosteel’s mothballing also affected several other companies that used to benefit from it, such as Hwange Colliery and the National Railways of Zimbabwe (NRZ), which got 50% of its business from Zisco.

“Hwange Colliery supplied 1,300 wagons [60 tonnes] of coal using NRZ rail services, which travelled about 700km to Redcliff, ” Manuhwa says.

“The Zimbabwe Electricity Supply Authority supplied a maximum of 105,000kW per month directly to Ziscosteel, and Sable Chemicals supplied oxygen furnaces through a specially designed 20km tunnel.”

Zimbabwe’s industry and commerce minister Sekai Nzenza says the country is importing more than $1bn worth of steel per year to support its metal industry after the closure of Ziscosteel.

This is despite the country having a massive 37bn tonnes of good-grade iron ore reserves that are yet to be exploited. It also has the potential to export 70% of its steel products to international markets and 30% can be sold locally.

Failed revival attempts

Several past attempts to revive Ziscosteel failed, including the 2011 Indian steel giant Essar Group’s $750m deal, with which it had hoped to save 3,000 jobs.

The deal collapsed in 2015 after clashes with the government over the ownership of mineral claims at Buchwa, Mwanesi, Ripple Creek and Bimco. Essar wanted control of iron ores.

On 29 August 2017, the government said it had secured a $1bn investment for the revival of Ziscosteel from a Chinese investor, R&F, but nothing tangible happened.

In 2017, Zimcoke, a company represented by former Movement for Democratic Change legislator Eddie Cross, promised to take over Ziscosteel’s $225m debt to the German KfW Development Bank in exchange for the steel company’s coke oven battery.

However, the deal collapsed in 2019 after a new board cited corporate governance breaches.

All eyes are on Kuvimba Mining to see if it will successfully resuscitate Ziscosteel, whose plant and equipment need a complete overhaul.

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