Manhize Iron Steel Plant has potential to boost steel exports
The Manhize Iron Steel Plant, being set up in Mvuma, is one positive development that must excite all Zimbabweans, particularly when one considers its potential impact on the economy, exports, job creation and overall improvement of people’s lives.
The US$1 billion mine, which aligns with President Mnangagwa’s economic development drive, is set to be one of the largest in Africa, with production set to reach five million tonnes a year.
Already, the National Development Strategy (NDS1) identifies the steel value chain as a critical sector that can contribute immensely towards the development of the country.
Through the national development blueprint, the Second Republic has committed to take deliberate efforts to support the iron and steel and general engineering industry to increase availability of locally produced iron and steel products.
For those that have been following the industry developments, they will agree that the plant will bring relief to national foreign currency coffers, by reducing the import bill.
At the same time, the plant is expected to boost the country’s exports of steel, iron, and related products.
Import substitution
Before delving into prospects of exports, the steel plant is going to make it possible for Zimbabwe to cut the huge bill of steel imports, which in turn will address the trade imbalance that is currently tilted in favour of imports.
Zimbabwe has been importing iron and steel, and their articles worth over US$300 million per year.
According to Trade Map, Zimbabwe imported iron and steel worth around US$128 million in 2020, with the bulk coming from South Africa (US$108.2 million), China (US$9.3 million), Zambia (US$5 million), and Seychelles (US$2.2 million).
During the same time, Zimbabwe has been importing articles of iron or steel worth around US$178 million, from across the world.
Of this figure, around US$110 worth of products came from South Africa, around US$50 million from China, and Zambia US$5 million.
When the steel company in full production, supplying manufacturers in the steel and iron business, there is potential for the country to meet its iron and steel requirements, which will result in the reduction of the huge import bill.
Potential for export
The iron and steel sector has been identified as a priority sector by the National Export Strategy (2019-2023).
Looking at the performance of the sector in the past, there is no doubt on its potential for export growth.
At one time, the iron and steel sector used to be the backbone of Zimbabwe’s economy offering support to other sectors such as agriculture, transport, manufacturing, and mining.
Products that dominated exports from the sector into the region and beyond included steel bars, metal sheets, boilers, bearings, pulleys, wire ropes, rail stock as well as agriculture and mining equipment.
Thus, indications are that once the Manhize Iron Steel Plant is operating in full capacity, the country will increase production and reclaim lost markets.
Zimbabwean will become one of the biggest steel players in the world, with capacity to meet requirements of most countries in the continent and beyond.
Projections are that the plant will start producing 1.2 million tonnes per year, making it easy for the country to increase exports of iron and steel and their articles.
Latest figures show that Zimbabwe’s exports of iron and steel and their articles in 2019 were around US$154 million in 2020, according to Trade Map’s direct data.
Of this figure, Mozambique was the largest export market taking products worth around US$121 million, followed by South Africa (US$23 million) and Botswana (US$4 million).
In terms of quantities, the country exported 28 thousand tonnes of iron and steel in 2021, and around 1,753 tonnes of articles of iron or steel in the same year.
With the projected output of five million tonnes from Manhize Iron Steel Plant when operating at peak, the country is expected to absorb all its requirements, with much more excess for exports to the rest of the continent and beyond.
According to TradeMap, African countries imported iron and steel worth around US$18 billion in 2021, up from US$15 billion in 2017, indicating an increase in demand.
Of this figure, the largest importers in 2021 were Egypt (US$3.5 billion), South Africa (US$1.8 billion), Morocco (US$1.7 billion), Kenya (US$1.3 billion), Nigeria (US$937 million), and Tunisia (US$905 million).
Leveraging on the African Continental Free Trade Area, there is potential for Manhize Iron Steel Plant to facilitate Zimbabwe’s trade with the rest of the countries on the continent.
Quick wins in regional markets
Potential export markets for Zimbabwe-produced iron and steel include Zambia, Botswana, Angola, Democratic Republic of Congo (DRC), Malawi, Mozambique, and Namibia.
According to Trade Map, Zambia imported iron and steel worth around US$226 million in 2020, with the majority coming from South Africa (US$113 million), China (US$64 million), Chile (US$27 million), and India (US$3 million).
In terms of quantities, Zambia has been importing more iron and steel over the years, from around 58 thousand tonnes in 2018 to around 81 thousand in 2021.
Leveraging on Zimbabwe’s short distance to Zambia, there is potential for Manhize Iron Steel Plant to produce products that will compete well in the neighbouring country.
In Malawi, most of (the iron and steel imports, worth around US$83 million in 2021 came from China, which accounted for around US$38 million.
The other major suppliers in the market are South Africa, Zambia, and Mozambique.
In terms of quantities, Malawi imported 39 thousand tonnes of iron and steel in 2021.
During the same year, Mozambique also imported around 111 thousand tonnes of iron and steel, valued at around US$99 million.
Major suppliers of this were South Africa, China, Japan, Turkey, and Portugal.
Namibia in 2021 imported 26 thousand tonnes of iron and steel worth around US$95 million, with major suppliers being South Africa, China, and Zambia.
For DRC, the import value of around 46 thousand tonnes of iron and steel was around US$126 million in 2021, with major suppliers being South Africa, China, Zambia, and Turkey.
All these countries listed above are just a snippet of the size of potential regional markets that will be serviced by Manhize Iron Steel Plant.
Considering the proximity of these markets, and their current source markets, that are as far as Asia and Europe, there is no doubt that locally produced iron and steel will compete well in the region.
Logistics is key
For the Manhize Iron Steel Plant to meaningfully contribute towards export growth, there is need to create facilitative infrastructure that will make it easy to move the products across the country, and beyond the borders.
Compared to other modes of transport, such as road, a functional and interconnected railway system is the cheapest, especially with bulky and heavy products like iron and steel.
Here, an efficient railways system, connecting the Plant to all major cities, and exit points will reduce the cost of locally produced iron and steel, which will improve their competitiveness in export markets.
It is encouraging that under the NDS1 period, under the Second Republic has committed to improve the rail infrastructure and increase freight as well as passenger movement.
The target under the NDS1 is to increase freight cargo moved from 2.6 million tonnes per annum in 2020 to 6.7 million tonnes per annum by 2025.
Considering the projected tonnage that will be coming from Manhize Plant, a railway network connecting the site to major railway networks will make it easy to move goods, as well as contribute to the attainment of targets set under NDS1.
