Zimbabwe Delivering On Promises to Investors

The huge investments into Zimbabwe by China’s giant Tsingshan Group were extended this week with the highly innovative deal for the 97km extension to the national 330 kilovolt grid running from Sherwood near Kwekwe to Manhize near Mvuma where it is building its integrated steel plant.

Tsingshan through its Zimbabwe subsidiary Dinson Iron and Steel Company, is already building a 500MW power station, so it has assured power supplies, and quite sensibly is building this by its three coke ovens in Hwange, since it is far cheaper to generate power and run the furnaces to produce metallurgical coke on the coal field than try and rail raw coal to a station and furnaces near the steelworks.

No doubt deals can be made with Zesa and other power generators to back up the Tsingshan station and maintain the constant flow of electricity to the steel mills, since these cannot be switched on and off on whim, but by taking up a licence as an independent power generator Tsingshan is contributing roughly what it needs into the pool.

Tsingshan has been operating in Zimbabwe, building chrome smelters in Selous for example, so knows the infrastructural needs, but also expects to have smooth sailing when it makes the necessary investments.

While the iron ore and limestone can be mined near Manhize, the main reason for choosing that site, and the chrome and other alloy minerals are not too far away, the coal for energy and carbon in the smelters was the one mineral at the other end of the country, so that meant Hwange.

While Zimbabwe sorted out the legalities of power some time ago, ending the Zesa monopoly on power generation and potentially on final user distribution, the national grid has to be under a single operating authority; this is standard across the world and even in places like the United States, where there are a large number of power companies, they have to run common regional grids to move that power around.

Tsingshan could get the electricity from Hwange along the existing national grid for most of the way, but the last just under 100km needed an east-west extension across the Midlands.

While Mvuma is on the Zesa grid, so the town is already lit up, the connection is not the exceptionally high voltage 330kV required for the sort of levels needed when the steelworks is fired up.

Zesa can supply what is needed in the interim stage, but the main grid line is needed for production.

The main problem is that Zesa is not flush with capital. So Tsingshan, which appears to be very prepared to deal with these sort of problems, proposed a deal, effectively paying a good chunk of its Zesa transmission bill up front.

There were reports that Zesa was a bit nervous of this sort of arrangement, although the outline of the deal was fixed at the end of last year, and Cabinet agreed to the detailed arrangements this week.

It is a joint venture with Zesa liquidating the loan by deductions on the monthly charges. The contractual arrangements were fixed and agreed, so it is now smooth sailing.

So everything is now ready to roll for the 330kV line, plus the two very large substations since users do not need electricity at this voltage, only the quantity that requires a very high voltage line to move as cheaply as possible with minimal transmission losses.

Basically Zimbabwe is fulfilling its promises to ensure that nothing will hinder this major investment, and that innovative and creative solutions will be found to every need.

When Zimbabwe said it was open to business at the start of the Second Republic it meant this. President Mnangagwa’s personal assurances to the head of the Tsingshan Group that everything needed would be done, in a totally corruption-free environment, was not an idle promise.

This is the sort of effort Zimbabwe has to make when delivering on promises. Talk is cheap. What is required is action, and the action done in time so there are no delays.

Covid-19 did generate some delays in the Tsingshan project, but these are being overcome and everything is now back on course.

The Tsingshan investment is, in many ways, a model investment for Zimbabwe. It uses Zimbabwean raw materials, and most of those materials, such as iron ore, limestone and coal are not really exportable in their raw state.

Even the chrome and nickel going into the stainless steels are more valuable in the stainless steel than as bars of metal.

Furthermore the investment goes far beyond bars of metal. Tsingshan plans on making products, steel sheet, roofing sheet and the many other products that downstream manufacturers in Zimbabwe need and are now the largest single user of the auctions to buy.

It is difficult to make products, run a major construction drive and go beyond assembly if you do not have heavy industry and the first generation of products from heavy industry.

This is what we are getting. There is a lot of loose talk about the modern world being largely post industrial, with a higher percentage of service industry.

But the main industrial countries, while adding vast quantities of extra value, are still at their heart reliant on heavy industry with steel being the number one product.

In many ways we are fortunate that the investor understands the complexities of a developing country, hence their willingness to do such much themselves including building a large power station, working out a financial package that allows Zesa to deliver that power from the station, and opening their own mines to feed their steel mills.

But despite this openness, they do need swift response from the authorities to sort out the minor problems and they have made it very clear that the deal was only possible once Zimbabwe built its walls against corruption.

The fact that we are open for business, not just as a slogan, but as a policy that everyone from the President downwards is prepared to implement is showing others that where a major global company can lead, a lot of others can follow. We deliver.

Source:

Leave a Reply

Your email address will not be published.