Four months after being bought by Indian firm Essar Global Holdings in a $750-million deal, production has yet to kick off at the Zimbabwe Iron and Steel Company (Ziscosteel), once Zimbabwe’s largest steelmaker.
Ziscosteel was shut down in 2008 amid allegations of “plunder and looting” by senior Zanu-PF officials and with a $300-million debt, and production is now being hampered by a wrangle over electricity, water and transport.
The country’s financially hamstrung parastatals, in an attempt to recover money owed to them by the steel giant, are reportedly withholding their services to force it to pay them. It is understood that the Zimbabwe Electricity Supply Authority is owed more than $10-million by Ziscosteel, and the local city council in Kwekwe is seeking $2-million.
In a bid to quell the embarrassing row, Zimbabwe’s government signed a memorandum of understanding with officials from global steel manufacturer Essar last week to guarantee the uninterrupted supply of essential services.
Welshman Ncube, the trade and industry minister, confirmed the memorandum and signalled that “production will begin at the end of the month”.
It is understood from the memorandum that Essar will be allocated the electricity produced by the independent Munity power station to meet the steel giant’s power needs and lessen the impact of the blackouts that regularly afflict the country.
Zimbabwe has a monthly domestic power demand of 2 200MW but is generating only 1 200MW, mainly from the Hwange and Kariba power stations.
Meanwhile, Ziscosteel has embarked on a recruitment exercise to “track down” former employees, particularly those in South Africa.
If successful, the exercise could be the first sizeable brain gain in Zimbabwe after years of economic decline and worker migration to neighbouring countries.
A local consultancy company, People Dynamix, is spearheading the recruitment exercise to track down nearly 1 000 former employees who are suspected of having migrated to South Africa.
People Dynamix consultant Joe Mashinya said: “As part of the deal to revive its operations, Ziscosteel has embarked on a major recruitment exercise and has 750 positions that need to be filled.”
The vacancies are for boilermakers, electricians, instrument and control technicians and, said Mashinya, “very competitive salaries” would be offered to returning employees.
The remuneration package for returnees includes benefits such as medical aid, housing and car loans, payment of school fees at private schools and meeting the returnees’ full costs of relocating to Zimbabwe.
Economist Eric Bloch said: “This is an expected event considering that a new investor has come on board and that with it there is fresh capital available to resume full-scale operations. However, we can’t overrate Ziscosteel’s latest recruitment exercise and expect an overnight change in the economy.
“What remains relevant is that, in the long run, Ziscosteel’s resumption of operations could lead to a drop in steel prices because steel is set to become available locally.”
At peak operating capacity, Ziscosteel produced one million tonnes of steel annually, which made it the second-largest steel producer in sub-Saharan Africa after ArcelorMittal South Africa.
Essar has indicated that it wants to increase steel production to 2.5-million tonnes in the next four years. It is understood that Essar enjoys “partial exemption” from Zimbabwe’s controversial empowerment laws. It has a majority stake in Ziscosteel, despite the indigenisation law that requires foreign companies to cede a 51% controlling stake to locals.