Ziscosteel: A chronically ill giant

After years of hoping for the resuscitation of operations by the giant Midlands company, the situation seemed to be heading for better days last year when a new investor came on board.

But the new owners, Essar Holdings, an Indian company with interests in steel, energy and infrastructure, has failed to pay outstanding salaries owed to workers. They had hoped that Essar would inherit the financial burden left by the old Ziscosteel management, but continued delays to the resumption of production means the workers will continue to go without salaries.

Ziscosteel is the largest steel works in Zimbabwe, and during its heyday employed thousands of people – indirectly providing for tens of thousands of dependents of the employees. But persistent viability problems, coupled with corruption in high places, have reduced it to a ghost of its former self. It is located just outside Kwekwe, in the small town of Redcliff.

Over the years the company has faced many operational problems and in 2008, the company was producing less than 12,500 tonnes, way below the break-even capacity of 25,000 tonnes.

It was wholly owned by the Government of Zimbabwe until it collapsed and Essar Africa Holdings Ltd bought a 54 percent stake. Government now owns 36 percent and a consortium of private investors holds 10 percent. The Zisco group of companies includes BIMCO, Lancashire Steel, Frontier Steel and Zisco Distribution Centre. Production used to meet the needs of the domestic market and were exported to other African countries and around the world.

But over the years, lack of investment, corruption and bad management, saw the fortunes of this industrial icon in Africa steadily decline. The national economic meltdown over the last decade all but finished it off.

The National Engineering Workers’ Union chairman, Tonderai Zisengwe, who represents workers from Lancashire Steel, a subsidiary of Ziscosteel, told The Zimbabwean that poverty had reached alarming proportions among the 2,500-strong workforce and their dependents. “Ziscosteel owes workers 12 months’ salaries and the last time they paid us was in April. Everyone was paid but that money dissipated before it even got home,” said Zisengwe.

Workers are battling to pay electricity and water bills, as well as school fees. Those not living in company accommodation are the hardest hit, as they find it difficult to pay rent, resulting in some of them being evicted.

The special Interest councillor for Redcliff, Freddy Kapuya, said the non-payment of salaries by Ziscosteel had reduced Redcliff and Torwood to ghost settlements. “At least 75 percent of Redcliff residents rely on Zisco and if the steel giant fail to pay its employees, you can imagine the impact it has on the municipality,” said Kapuya. “Zisco employees are very patient as they continue to go to work without getting salaries. Hope has kept them alive and they should be rewarded.”

Schools and hospitals in the town have also been hard hit as Ziscosteel used to pay their bills and ensured property maintenance through its social responsibility programme.

The only hospital in Torwood, which was owned by the company, is now being run by a private company while the Medical Centre in Redcliff, another Ziscosteel catchment town, is also under private management. The workers’ union has sent out an SOS to schools, asking them not to expel employees’ children who are failing to pay fees.

While the same supporting letters were being written for workers to take to the Zimbabwe Electricity Supply Authority and the respective municipalities, these service providers are apparently getting impatient and are proceeding with disconnections.

The only relief the workers have is accommodation, as the company sold most of its houses to sitting tenants. Councillor Joseph Matewa of Redcliff said the local authority had engaged Kwekwe City Council to discuss the possibility of a rate slash which, if approved, would be a relief to the residents.

“As it stands, we are not in a position to reduce the water bills because we are not a water authority. Redcliff buys water from Kwekwe. What we have done is to try and engage our partners and negotiate for a slash to ease the residents’ burden,” said Matewa.

The stand-off between the two local authorities has resulted in Redcliff accruing a $7m water debt to Kwekwe City Council. Matewa said his council was only collecting around $80,000 per month in revenue out of the expected $450 000 because of non-payment of salaries to Zisco employees.