Zimasco Folds , Drives Final Nail On Kwekwe, Midlands Industry

By Mark Mhukayesango

KWE KWE-December 17, 2015-FERROCHROME GIANT, Zimasco last week finally succumbed to economic
pressures , coupled with a dip in world prices when it switched off
its two smelting furnaces in Kwekwe citing viability challenges as
industrial dearth continues in the mining town of Kwekwe which has
seen major companies fold this year alone.
Last month the company downsized its workforce from 1500 to 56
employees , battling to stay afloat , operating at under 40 percent
capacity utilisation.
Zimasco, a giant ferrochrome company in the 90s employed over 3 000
employees at its furnaces in Mutorashanga, Shurugwi and Kwekwe, giving
hope to thousands of families in the Midlands.
But fortunes have not gone Zimasco’s way as world chrome price have
continued to tumble ,with even the lift on the ban of chrome exports
failing to save Zimasco.
The Government in June , lifted the ban on chrome ore exports , a
relief to the chrome company which jointly owns over 70 percent of
chrome deposits along the Great Dyke with another struggling company
ZimAlloys .
But the lift on raw chrome ore exports did not spur production at the
firm which somewhat sunk into oblivion ,shutting down its two
remaining furnaces , spelling the demise of a once vibrant entity.
Ferrochrome prices hit their all time low on the world market in the
past three years, grossly impacting Gweru industry which rely on the
firm’s profitability.
“The current maximum operational capacity of the company (which is
based on five furnaces) is 180 000 metric tonnes (mt) of ferrochrome,
which is produced from approximately, 540 000mt of chrome ore.
However, at its peak prior to 2006, the company operated six furnaces,
which produced 210 000mt of ferrochrome, produced from approximately
600 000mt of chrome ore,” Clara Sadomba,Zimasco head of
communications said before the company shut down its furnaces citing
viability challenges.
“Zimasco, which encompasses Kwekwe, Shurugwi and Mutorashanga
divisions, continues to operate at 40% of capacity (a level that was
adopted 12 months ago) due to depressed ferrochrome prices that have
been on a continuous downward trend since the global financial crisis
of 2008, ” Sadomba said before the company folded.
Even the company’s vast chrome deposits have failed to resuscitate the
once thriving entity where it owns hundreds of tributaries surrounding
the Great Dyke.
Gweru based economist Trust Chikohora said the demise of Zimasco was
an unfortunate for Midlands and was a blow to an already struggling
industry.
“Zimasco is one of the biggest companies here and for it to fold in
such a fashion is unfortunate. Many families relied upon the company
for survival through employment, but we are likely to see more workers
becoming redundant after this closure,” Chikohora told Radio VOP.
Chikohora said :”The falling world ferrochrome and steel prices have
really affected industry in Midlands as most of the big companies like
ZimAlloys and Zisco steel have a bias towards such products. This
really spells doom for our industry in the Midlands.”
Chikohora said the province should begin to explore other ways of
getting the industry back on track , since the mainline industries
have failed, citing small to medium enterprises as a key driver of
industrial growth.
“We should start exploring other means of survival and SMEs are a
current phenomenon which will spur growth, although we need fresh
foreign investments for the traditional industry,” he said.
Zimbabwe has experienced industrial dearth for a decade and as many
companies continue to fold under economic pressure, businesses have
become highly informalized in face of stiff foreign competition.
Chairman of the CZI, Midlands Chamber, Mathias Ruziwa argues that
Zimasco may have shut down for the year and would soon resume
production.
“We are in a period where companies shut for the year ,so they may
have decided on an early shut down and would soon resume,” said
Ruziwa.
But sources at Zimasco confirm that the company was saddled with a
huge debt , including a huge Zesa bill where it has to pay $1 million
per month to services the debt.
Zimasco consumes large amounts of electricity ,hence the failure to
pay the debt.
Companies like Sable Chemicals downsized this year due to high
operating costs and are not importing Ammonia from South Africa,
abandoning the electrolysis method which is power intensive.
The company last week fired over 160 workers , whilst steel giant
Zisco steel fired 3 000 workers on three months notice-spelling more
gloom for industry in Kwekwe and Gweru.
In Kwekwe the only notable companies operating are Dendairy and
Steelmakers among other small companies.
in Gweru , Lesafree, Bata and Midlands although some of them are
operating below capacity with need fresh capital injections.
Another economist and university lecturer Cosmas Ndlovu said the
Midlands Industry has to be declared a state of emergency.
“Governemnt should treat this province as an industrial hub with
capacity of changing people’s lives hence should be declared a state
of emergency. This would entail that resources will be channelled to
crucial sectors like mining which is the bedrock of this
province,”Ndlovu said.
Ndlovu added :”Government should also give industry in the midlands a
special economic zone status so that it becomes a priority in resource
allocation.”
A special economic zone is an industry area where companies are given
incentives for production ,like tax holiday.
But government since 2012 has been ranting about the SEZs but nothing
has been done to encourage local companies battling foreign
competition to produce more.
2015 has not been a favourable year for industry in Midlands as
companies have continued to fold under heavy economic pressures and
2016 is not promising any industrial recovery as the economy remains
subdued.