Zisco: More than meets the eye

zisco steel

zisco steel

Victoria Ruzvidzo Business Focus
I have often wondered as to what is it about the Zimbabwe Iron and Steel Company that not even an attempt by at least three experienced and cash-rich foreign investors and tonnes of research work have managed to resuscitate its operations for more than a decade now.

Committees have been set up, studies done but all these have failed to produce results. Foreign investors of such magnitude as Essar Africa Holdings, a global steel giant from India, also failed in their attempt to get Blast Furnace Number Four and the rest of the firm firing again.

But thanks to former managing director Dr Gabriel Masanga who put everything into perspective on Tuesday when he presented a paper to the Parliamentary Portfolio Committee on Industry and Commerce: Zisco resuscitation is hugely dependant on the performance of parastatals such as the National Railways of Zimbabwe, the Zimbabwe Electricity Supply Authority and Hwange Colliery.

Sable chemicals also plays a critical role in the process.

The sad reality here is that all these parastatals are saddled with huge debts and operational deficiencies that threaten their very own existence and are therefore, not in a position to breathe life into Zisco.

For years they have struggled to get back in shape but they are caught in a web of challenges that Auditor-General Ms Chiri doubts if they can still be referred to as going concerns. This is scary and yet so true.

For instance, NRZ is almost on its knees now while Zesa Holdings has not operated at full capacity for as long as I can remember. Zisco will need oxygen from Sable but the latter has qualms with Zesa about electricity being too expensive and is also working on modalities to break water into oxygen and hydrogen, a process that might take time.

Furthermore, Hwange has had its fair share of problems. It will need NRZ wagons to supply coal to Zisco.

The revelation by Dr Masanga has provided answers to some of the questions that we have had and more importantly, shows the extent to which poor performance by parastatals have had a ripple effect on the economy.

For just Zisco to operate, it needs at least three parastatals to be producing optimally and that is foreign language to most of the country’s parastatals that have done more to bleed the economy than they have contributed to its sustenance.

As illustrated in the Zisco issue, failure by parastatals to operate efficiently has compromised the performance of downstream companies and industries that depend heavily on their viability.

You can imagine the extent to which NRZ’s state has compromised the performance of other industries that rely on this mode of transport for their raw materials and output. In her report for the period ending December 31, 2015, Ms Chiri stated that poor corporate governance practices and failure to implement proper management systems and debt collection strategies affected most parastatals resulting in them having cumulative losses and net liabilities of more than $1 billion.

Indeed most of the parastatals and state enterprises have continued to churn out losses and negative news for decades now. Most of the challenges stem from poor corporate governance practices that have seen a number making uneconomic decisions while paying board fees and management salaries that have not been sanctioned.

The NRZ leads the pack in terms of losses with cumulative losses of US$276,4 million at the end of 2015. The situation may be worse now.

“This cumulative loss and net liability position along with other matters indicate the existence of material uncertainty that may cast a significant doubt over the National Railways’ ability to continue as a going concern,” said Ms Chiri in her report.

On its part, Zesa has also been hamstrung by operational challenges that include upfront payment of projects that have yet to be implemented and huge losses from theft of cables and other equipment, among a plethora of challenges that have impeded optimal production of power.

But the question that beckons is whether this should spell doom for Zisco. When will all these parastatals be brought back to viability so that they can service ZISCO and the entire economy well?

What does it take to resolve the challenges raised by Ms Chiri every year about the parastatals?

Must the economy come right first before the parastatals are attended to or the parastatals themselves need to play a strategic role in reviving the economy?

Your guess is as good as mine. Finance Minister Patrick Chinamasa and all the ministries under which respective parastatals fall need to move with haste to redress the situation. Of course they are all too aware of the challenges and Government has periodically raised concern. But now more action is required to suture those parastatals that have become a major sore point in the economy.

In his foreword to the Corporate Governance Framework for State Enterprises and Parastatals in Zimbabwe produced by the Ministry of State Enterprises and Parastatals in 2010, President Mugabe stressed the importance of viable parastatals in the economy and admonished them to pull up their socks but most have not taken heed.

“Government since independence bestowed the developmental mandate to various State Enterprises and Parastatals and entrusted upon them the primary role of promoting growth with equity especially with regards to the previously marginalised sectors, ethnic groups and regions of the country. Through State Enterprises and Parastatals, Government assumed the facilitative role in the provision of key infrastructure and utilities such as, roads, rail and air transport, telecommunication, electricity and water.

“It is imperative that Government ensures that these State Enterprises and Parastatals have sound governance systems. Good corporate governance would ensure improved service delivery of these basic human needs for which Government is accountable to the people of Zimbabwe, and at the same time minimise risks associated with unacceptable human behaviour.

“Corporate crime, as an example of these risks, has been a disease the world over which strives in environments characterised by weak corporate governance. Historically our African societies have curtailed this human weakness through the philosophy of ‘Ubuntu’ or ‘Unhu’.

“I want to urge all of you, within your various roles and capacities, to commit to the basic principles of accountability, responsibility, transparency, responsiveness and fairness. Leading by example will transform our fortunes and set new benchmarks for efficiency, profitability, environmental and social responsibility, for the benefit of all Zimbabweans,” he said.

Zisco Steel needs to start running and create the jobs but this is not going to be an easy one. Government needs to urgently look into the situation and act decisively.

Recently Industry and Commerce Minister Mike Bimha said Government is engaging potential suitors for Zisco and we hope a more holistic approach that takes into account the challenges raised by Dr Masanga and reports done before so that the project takes off without glitches once an investor is identified.

We all learn from our mistakes so we need to see this in the Zisco deal and many others that may have fallen by the wayside had things been done differently.

When it operated at full capacity, Zisco produced about one million tonnes of steel for both the local and export markets while employing 6 000 people.

Zisco was the economic backbone of the Midlands Province, supporting downstream industries in the surrounding areas and entire country.

The steel giant that was dwarfed by challenges and now lies lifeless.

Dr Bimha and his team will need to produce an investor or two as soon as yesterday. Threats by Government to go it alone if there is no joy from foreign investors must also be followed through so that the economy does not wait another decade to witness Zisco’s revival.

Tidbits
If you had a bank

If you had a bank that credited your account each morning with $86 400 that carried over no balance from day-to-day, and allowed you to keep no cash in your account, every evening cancelled whatever part of the amount you had failed to use during the day, what would you do? Draw out every cent, of course!

Well, you have such a bank, and it’s name is TIME. Every morning it credits you with 86 400 seconds. Every night it rules off, as lost, whatever part of this you have failed to invest to good purpose. It carries over no balances. It allows no overdrafts.

Each day it opens a new account for you. Each night it burns the records of the day. If you fail to use the days deposits, the loss is yours. There is no going back. There is no drawing against “tomorrow”. You must live in the present — on today’s deposits.

7 superb sentences . . .

worth sharing

Shakespeare
Never play with the feelings of others, because you may win the game . . . but the risk is that you will surely lose the person for a life time.

Napoleon
The world suffers a lot, not because of the violence of bad people, but because of the silence of good people!

Einstein
I am thankful to all those who said NO to me, as it’s because of them I did it myself.

Abraham Lincoln

If friendship is your weakest point, then, you are the strongest person in the world.

Shakespeare
Laughing faces do not mean that there is absence of sorrow!, . . . but it means that they have the ability to deal with it.

William Arthur

Opportunities are like Sunrises, if you wait far too long you can miss them.

Hitler
When you are in the light, everything follows you, . . . but when you enter into the dark, . . . even your own shadow leaves you.

Have a great day. In God I trust.

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