Manhize steel plant: A boon for the economy

Source: Manhize steel plant: A boon for the economy | Sunday Mail (Opinion)

Trade Focus
Allan Majuru

Manhize iron and steel plant being set up in Mvuma is a positive development that must excite all Zimbabweans given its potential impact on exports, job creation and livelihoods.

The US$1 billion project, which aligns with President Mnangagwa’s economic development drive, will be one of the largest steel plants in Africa.

The National Development Strategy 1 (NDS1) has already committed to take deliberate efforts to support the iron and steel industry and its value chain.

Import substitution

The steel plant is going to make it possible for Zimbabwe to cut the huge bill of steel imports.

Zimbabwe has been importing iron and steel, including accessories, worth over US$300 million annually.

According to Trade Map, Zimbabwe imported iron and steel worth US$128 million in 2020, with the bulk coming from South Africa (US$108,2 million), China (US$9,3 million), Zambia (US$5 million) and Seychelles (US$2,2 million).

In the same period, the country imported articles of iron and steel worth US$178 million from across the world.

Of this figure, US$110 million worth of products came from South Africa, US$50 million from China and US$5 million from Zambia.

When the Manhize plant begins production, the country can potentially meet all its iron and steel requirements, thus eliminating the huge import bill.

Potential for export

The iron and steel sector has been identified as a priority sector under the National Export Strategy (2019-2023).

It used to be the backbone of Zimbabwe’s economy and fed sectors such as agriculture, transport, manufacturing and mining.

Products that dominated exports in the region and beyond included steel bars, metal sheets, boilers, bearings, pulleys, wire ropes, rail stock as well as agriculture and mining equipment.

Once the steel plant is up and running, Zimbabwe will reclaim lost markets.

The country will become one of the biggest steel players in the world, with capacity to meet requirements of most countries in Africa and beyond.

The plant is expected to start producing 1,2 million tonnes per year, making it easy to increase exports of iron and steel and their articles.

In 2020, exports of iron and steel and their articles were around US$154 million, according to Trade Map.

Of this figure, Mozambique was the largest export market, taking products worth US$121 million, followed by South Africa (US$23 million) and Botswana (US$4 million).

In terms of quantities, the country exported 28 000 tonnes of iron and steel in 2021, and around 1 753 tonnes of articles of iron or steel in the same year.

With projected peak output of five million tonnes from Manhize, the country is expected to absorb all its requirements and be left with excess products for export.

African countries imported iron and steel worth US$18 billion in 2021, up from US$15 billion in 2017, indicating an increase in demand.

Of this figure, the largest importers were Egypt (US$3,5 billion), South Africa (US$1,8 billion), Morocco (US$1,7 billion), Kenya (US$1,3 billion), Nigeria (US$937 million) and Tunisia (US$905 million).

Leveraging on the African Continental Free Trade Area, there is potential for Manhize to boost Zimbabwe’s trade with the rest of the continent.

Quick wins in regional markets

Potential export markets for Zimbabwe-produced iron and steel include Zambia, Botswana, Angola, Democratic Republic of Congo (DRC), Malawi, Mozambique and Namibia.

Zambia imported iron and steel worth US$226 million in 2020, with the bulk coming from South Africa (US$113 million), China (US$64 million), Chile (US$27 million) and India (US$3 million).

Zambia has been importing more iron and steel over the years from around 58 000 tonnes in 2018 to 81 000 tonnes in 2021.

Leveraging on Zimbabwe’s proximity to Zambia, there is potential for the steel plant to produce products that will compete in the neighbouring country.

In Malawi, most of the iron and steel imports — worth around US$83 million in 2021 — came from China, which accounted for around US$38 million.

The other major suppliers in the market are South Africa, Zambia and Mozambique. In terms of quantities, Malawi imported 39 000 tonnes of iron and steel in 2021.

During the same year, Mozambique also imported around 111 000 tonnes of iron and steel valued at US$99 million.

Major suppliers were South Africa, China, Japan, Turkey and Portugal.

In 2021, Namibia imported 26 000 tonnes of iron and steel worth US$95 million, with major suppliers being South Africa, China and Zambia.

The DRC also imported 46 000 tonnes of iron and steel valued at US$126 million in 2021, with major suppliers being South Africa, China, Zambia and Turkey.

All these are potential markets for Manhize.

Considering proximity of these markets and their current source markets that are as far as Asia and Europe, there is no doubt locally produced iron and steel will be competitive in the region.

Logistics is key

For Manhize to meaningfully contribute towards export growth, there is need to create facilitative infrastructure that will make it easy to move products across the country and beyond borders.

A functional and interconnected railway system is the cheapest and most convenient mode of transport for iron and steel.

An efficient railways system connecting the plant to all major cities and exit points will reduce cost of locally produced iron and steel, which will improve their competitiveness in export markets.

It is encouraging that under the NDS1, the Second Republic has committed to improve rail infrastructure and increase freight as well as passenger movement.

The target under the NDS1 is to increase freight cargo from 2,6 million tonnes per annum in 2020 to 6,7 million tonnes per annum by 2025.

Considering projected tonnage that will be coming from Manhize, a railway network will make it easy to move goods, as well as contribute to targets set under NDS1.

Allan Majuru is the ZimTrade chief executive officer.

 

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