Zimbabwe has approved its first application for a special economic zone (SEZ) which will pave the way for the resuscitation of an industry value chain. The Special Economic Zones Authority, which is being chaired by Gideon Gono approved its first application for a steel making zone in the mineral-rich Midlands province although Industry, Commerce and Enterprise Development Minister Dr Mike Bimha said the zone is not limited to an area but relates to the steel making process.
President Emmerson Mangagwa let the cat out of the bag when he proposed to Minister Bimha for the setting up of an economic zone that is driven by mineral deposits as opposed to the three proposed Sunway City industrial park in Harare, a financial services hub in Victoria Falls and an Industrial hub in Bulawawo.
Industry Commerce and Enterprise Development Minister Bimha later confirmed the first SEZ had in fact been approved for the steel industry. “It was approved two weeks ago and we were just waiting for the right time to make the announcement,” he said.
“The steel industry has a lot of bearing on industrialisation. “Every country with a vibrant economy has a steel industry that is up to scratch and when you have a steel industry a lot of downstream industries,” Minister Bimha said.
Analysts believe that Government can study the successes of such zones in other countries with the most successful being the Tata Steel Special Economic Zone in India. Tata Steel Special Economic Zone Limited was incorporated in the year 2006 as ‘Gopalpur SEZ Ltd.’ and the name was changed in the year 2014 to ‘Tata Steel Special Economic Zone Ltd.’
The company, a 100% subsidiary of Tata Steel Limited, is engaged in developing of Industrial Park including Special Economic Zone on the east coast of India at Gopalpur. He said Zimbabwe used to be second to South Africa as the biggest steel producing country in the region.
“We have said the way we are looking at it is not to just revive Ziscosteel but revive a vibrant steel processing sector. So it’s not just Ziscosteel but the entire steel processing sector. Because of the strategic importance we decided that we should make steelmaking, as a sector, a SEZ,” Minister Bimha said.
The steel making SEZ becomes the first application since the SEZ board led by Dr Gideon Gono was set up. The other three SEZs that were created by Government before the setting up of the SEZ board remain in place.
Minister Bimha said the new SEZ is expected to expedite the ongoing negotiations for investment into Ziscosteel that are already at an advanced stage. “Because we are in the process of finalising with investors, we decided to approve it to facilitate implementation,” he said. President Mnangagwa earlier this month vowed to resuscitate Ziscosteel as part of his 100-day plan after previous failed attempts.
Work towards setting up a new steel plant has already started after an initial assessment discovered that only 15-20 percent of the old plant was still usable. The past industrial policy has been partly anchored on the revival of Ziscosteel, as it was envisaged to support downstream industries such as foundries and other establishments. Ziscosteel however remained a sleeping giant after erstwhile suitor Essar pulled out of the deal at the eleventh hour.
The revival of Ziscosteel is expected to foster foreign currency savings to the tune of $350 million, as the country is now relying on steel imports. It is also expected to generate not less than $1 billion in export earnings
In the long term, Minister Bimha said Government wants to promote value addition in the steel industry. “We want to produce stainless steel which has more value. Flat steel products are also expected to be produced locally.”
Government is today expected to gazette the Ziscosteel Debt Assumption Bill to facilitate the takeover of over $380 million owed to creditors by the steel company and pave way for resuscitation of the now defunct enterprise.
Global Steel Industry and China
The steel industry has become brutally competitive with the opening up of global markets. Efficiency, cost effectiveness, and marginally low operational environments are the key metrics of competitiveness. Beyond positioning themselves in locations that offer these conducive competitive metrics, leading steel mills must possess the added advantage of heavy capital.
For the leading steel mills in the world, there is an optimistic new paradigm where at certain levels of capital investment, the marginal costs of output are conceivably nearing zero. Chinese mills have carved a niche in both; identifying environments that offer key metrics of competitiveness, and then Chinese central government capacitating large sums of capital.
It follows then, if Zimbabwe is to benefit from the global Chinese steel ascent, it should conceivably be able to offer a competitive environment and attract an entity that is capacitated large amounts of capital by the Chinese government. The country was previously challenged in both areas.