Metalwork company may close

UNCLAS HARARE 000161

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD ELTN ZI
SUBJECT: Metalwork company may close



1. Summary: Another pillar of Zimbabwe's economic
infrastructure may crumble. The Zimbabwe Iron and Steel
Company (ZISCO),a parastatal and the country's sole
iron/steel manufacturing company, seems headed for closure
unless Government comes up with a costly rescue package.
End Summary.

Formerly Africa's largest steelworks
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2. After an act of parliament created ZISCO in 1942,
operations started at Redcliff in 1946, with the first iron
produced in 1949. For many African industrialists, ZISCO
has made an important historical mark, since it became the
largest integrated steelworks in black Africa in the sixties
and seventies. It remains a vital source of steel for
products used in Zimbabwe's agricultural, mining, metal
foundry and construction industries. However, the GOZ has
badly mismanaged the plant since Independence, racking up
debts of US$ 67.3 million. Some 18 studies by international
consultants over the years have recommended modernization of
the aging plant and equipment.

Steel vital for economy
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3. Lacking forex for imports, Zimbabwean companies rely
heavily on the company for raw materials. A sizable number
of unemployed (at least in the formal sense) Zimbabweans are
engaged in some form of metal-fabricating activity. The
closure of ZISCO would thus add to the country's already
high unemployment.


4. On its own, ZISCO employs as many as 6,000, who support
over 20,000 dependents at its Redcliff plant. In addition,
the company's subsidiaries of Lancashire Steel and Bucwa
Iron ore mine collectively employ 1,350 with over 6,000
dependents. It was once reckoned that every steelworker
indirectly creates employment for 25,000 others in upstream
and downstream industries such as mining of ore and
limestone, foundries, rolling mills, engineering and steel
fabricating plants.

Political meddling
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5. The GOZ has frequently changed managers at ZISCO without
rhyme or reason. ZISCO managers have tried and failed
repeatedly to launch a fourth blast furnace that could
nearly triple output. In 1998, the GOZ tried briefly to
privatize ZISCO and its associated companies. There were no
serious offers as prospective buyers already saw which way
the wind was blowing. The Government then invited a number
of countries, including China, to aid the rehabilitation.
Lots of talks ensued, but little concrete assistance
materialized.

Comment
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6. ZISCO provides yet another snapshot of the de-
industrialization of Zimbabwe, whose economy has already
shed 35 percent of real GDP in 5 years. Eternally
optimistic Zimbabweans like to reassure themselves that the
country will bounce back once it has rational government.
However, it could take generations to repair the damage to
Zimbabwe's infrastructure if the economy continues to lose
one percent of each month for another year or so.

Sullivan