Zimbabwe Strives for Carbon Steel Domination
Zimbabwe Strives for Carbon Steel Domination

Zimbabwe Strives for Carbon Steel Domination

  • 31-Jan-2023 11:37 AM
  • Journalist: Emilia Jackson

Zimbabwe: Zimbabwe is well on its way to becoming one of the top Carbon Steel producers in sub-Saharan Africa in just three short years. This remarkable growth is being made possible thanks to investments from generous international investors and the interventions of Finance and Economic Development Minister Professor Mthuli Ncube. At a recent WEF event held in Davos, Switzerland, Prof. Ncube pointed out that Africa deserves to be given special attention when it comes to economic affairs due to our vast resources in both the mining sector and human capital with its generally young population.

Investing activity in Zimbabwe continues to grow, as more investors explore opportunities in mining, agriculture, and tourism.

At the WEF, the delegation conveyed a message that "Zimbabwe is open for business" Across all sectors of the economy, there was "very clear".

"For example, there are opportunities in mining, where we have had great successes. In the mining space, we expect that Zimbabwe will be one of the largest Carbon Steel producers in sub-Saharan Africa in the next three years due to investments that are currently taking place," said Prof Ncube.

We are proud to be a major producer of Lithium in the world, ranking number five globally. We have some incredibly interesting projects happening in this sector. Additionally, we proudly share the status of being joint top producers of Lithium with South Africa in Africa.

"So, we have great resources and great investments in that area. Also, we pitched investments in the renewable energy space, solar and hydropower stations. In the solar space, Government is offering Government guarantees of power purchase agreements in terms of the offtake agreements (such that) if the utility can't pay, central Government will pay."

Prof Ncube highlighted the potential of Zimbabwe's tourism industry through a public-private-partnership (PPP) system, with private companies taking the lead in operationalizing concessions. Additionally, there is great potential for agro-processing due to Zimbabwe's position as a major agricultural country on the African and global stage.

We have seen a great deal of enthusiasm from investors at WEF and other events over the years. There has been consistent interest in our interactions with them.

"We have seen a steady flow of investors coming into Zimbabwe," said Prof Ncube.

Zimbabwe looks set to be a major Steel producing country as Dinson Iron and Steel Company (Disco), a subsidiary of the renowned Chinese firm Tsingshan Holdings, is investing in a US$1 billion Manhize Steel plant. President Mnangagwa carried out the ground-breaking ceremony for the project late last year. Additionally, Kuvimba Mining House is on the ground to relaunch infamous ZiscoSteel following multiple feasibility studies and contracts being signed.

Zimbabwe is set to embark on a US$300 million investment in modern technologies and high-grade Steel production. Mining projects are being launched across the country, including in Buhera, Goromonzi, Insiza District and Mutoko. Lithium deposits have also been found in Mberengwa. To maximize returns, exports of raw minerals have been banned and companies are working to establish processing plants. This is sure to elevate Zimbabwe's mining sector to new heights.

Inflation has become a widespread issue, with Prof Ncube noting that it is not just Zimbabwe but "every other country in the world" that is experiencing inflation and increased interest rates.

Inflation is currently on the rise, and there are two main reasons why. Firstly, weakening of the domestic currency and volatility in its value is contributing to inflation here at home. Secondly, imported goods such as food, fuel and fertilizers are raising prices due to disruptions in the global supply chain.

The inflation rate in Zimbabwe is reaching sky-high levels, with half of it being caused by imported factors and the other half stemming from domestic issues. To combat this rampant increase in costs, the strategy employed has been to stabilize the currency, raising interest rates to a point where speculation against it becomes prohibitively expensive.

Of course, there are some people who do get away with it, but we have imposed heavy penalties here and there. So, we have seen some stability and inflation coming under control on a month-on-month basis, then it will start falling on a year-on-year basis," he stated.

Professor Ncube reminded governments of the need to tread carefully when it comes to levels of debt, due to the risk of high interest rates leading to runaway debt.

Professor Ncube declared that Zimbabwe was exploring a solution for their debt problem, known as " asset recycling ".

To make sure our infrastructure projects reap long-term rewards, we are engaging in public-private partnerships (PPP) that allow private entities to manage and maintain those facilities for a period of 25 to 30 years. This approach allows us to receive upfront payment from the private entity and retire any outstanding debt pertaining to the project.

That will help us a lot in managing our foreign debt around projects, for example. So, dealing with it is very critical. We are also working hard to deal with our entire debt restructuring and arrears clearance agenda," he stated.

Zimbabwe is now actively seeking investors to take part in asset recycling "on two specific projects".

Prof. Ncube announced that they are in the process of signing agreements regarding potential funding sources. No further details were provided to protect those involved.

"But they are pushing, and we are also pushing. We think this is good for us. In my view, other African countries should look at that to crowd in the private sector in resolving the debt for Government by allowing the private sector to manage these assets on a BOOT (Build Own Operate and Transfer) arrangement. They collect user charges and release the Government of that burden," he stated.

Zimbabwe has implemented a successful restructuring of its private debt, which was due to blocked funds from the currency reform agenda that began in October 2018. Many investors were unable to repatriate their dividends and pay their offshore debts as part of this agenda.

Prof Ncube reported that this debt has been restructured into debt instruments with differing maturities, beginning at one year.

Zimbabwe can service its debts sustainably thanks to a debt restructuring exercise, making it attractive to investors from abroad "will be able to receive something".

Bondholders of a company have the option to discount their bonds should they choose to take a loss and sell them to another party. This gives holders the potential for savings that could be beneficial in the future.

"So, we have started that process of restructuring our debts," stated Prof Ncube.

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