Indigenisation hits steel maker

via Indigenisation hits steel maker – NewsDay Zimbabwe January 28, 2014 by Blessed Mhlanga

THE confusion around the country’s indigenisation laws has had an adverse impact on the operations of top steelmaking company Steelmakers Zimbabwe that is now seeking partners to help complete its Masvingo Sponge Iron plant.

The company, whose workers were mulling a strike, after failing to pay a 12,5% National Employment Council (NEC) approved salary, said it was in dire need of courting new capital to improve operations.

Last year, the NEC set $270 as the minimum wage for workers in the industry, which would have seen Steelmakers employees get a 12,5% increase on their salaries across the board.

Steelmakers reportedly pays its workers a minimum salary of $240 a month.

Group general manager Alexander Johnson said Steelmakers, currently operating at below 35% capacity, was looking for new capital of up to $30 million to shore up its operations at the Masvingo Sponge plant.

The plant opened in 2005 and was earmarked for a $50 million investment, but shareholders later withdrew their funds due to an economic meltdown prevailing then.

“Our operations in Masvingo were supposed to ensure that we produce sponge iron and process it to steel billets before forging it to complete products and exporting it, but shareholders withheld funds after an initial investment of $7 million,” he said.

“We, therefore, need $30 million to ensure that the plant in Masvingo is completed because at its present stage we cannot begin to get profits out of it, we can’t get that kind of investment locally so we have to start looking outside.”

Johnson said a number of investors had shown interest in the project, but they were scared off by the indigenisation law.
Currently, Steelmakers is exporting sponge iron from its Masvingo plant directly to Zambia at very low prices and thus creating a fiscal burden on its operations.

The company also needs another $6 million to rehabilitate its Redcliff-based works which was established in 1998.

“Those machines have a life span of 20 years and they need to be replaced at about $6 to $7 million, but because of the liquidity crunch in Zimbabwe that money cannot be found here,” he said.