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Inertia in critical Government projects puzzling

11 May, 2014 - 00:05 0 Views
Inertia in critical Government projects puzzling Coal can be transformed into fuel

The Sunday Mail

Coal can be transformed into fuel

Coal can be transformed into fuel

Business Brief
IMPORTING all manner of goods from across the country’s borders has almost become a fetish.
How else can one describe the current obsession to shop for even the barest of necessities from our neighbours?
Startlingly, the Ministry of Finance indicated that in 2010 the country spent more than US$1 billion on motor vehicle imports, US$1 billion on oil imports and US$100 million on potatoes.

Yes, US$100 million on potatoes.
Over time, this gluttony by locals for foreign products, which, unfortunately, has not been compensated by any meaningful drive towards promoting local production, has reflected badly on the country’s trade statistics.

Treasury figures show that last year Zimbabwe absorbed imports worth more than US$7,7 billion, far outstripping exports, which stood at US$3,5 billion.

This unsurprisingly yielded a trade gap of more than US$4,2 billion.
The trend, again, continued in January, with imports climbing to US$479 million against exports of US$278 million.

Well, some quarters claim that the resort to imports is perfectly understandable considering the weak state of local industry.

But what is more worrying for the local economy is the continued export of raw materials, a development that is prejudicing the economy of potential revenue.

Not much has been done to add value and increase export earnings.
Commodities from the country’s mining sector, from the Mutoko black granite, platinum, gold and coal, continue to be shipped raw to overseas markets.

Critical projects that might otherwise add fillip to the country’s economic growth efforts remain largely ignored, it seems. The maiden statement by new Reserve Bank of Zimbabwe Governor Dr John Mangudya is, however, very encouraging.

He noted: “The economy is weaker and the financial system is depressed. We need to be courageous and skilful to manage the situation on hand. . .

“It is also critical that the relevant authorities and the productive sectors of the economy promote value addition and increase export earnings to enhance the level of liquidity in the economy. The Reserve Bank will do its part.”
Similar, endless pronouncements have been made before.

It is now time to walk the talk.
There is an agreement, enshrined in our local legislation, particularly the empowerment Act, that local resources must sweat for Zimbabweans.

This is not happening. Rather, most of our mineral wealth is sweating for foreign lands. As a cornerstone of the country’s renewed efforts to set the economy on a sustainable growth path, value addition and beneficiation of our local resources must be pursued in earnest.

Coal, why not diesel?
Zimbabwe is blessed with mineral resources; in fact, there are more than 40 minerals that are currently being exploited. And coal mining is one of the most pronounced activities, especially in Hwange.

It is estimated that the country has more than 26 billion tonnes of coal in reserves. This has attracted companies such as Hwange Colliery Company Limited (HCCL) — a key player in the sector — South Mining, Chilota Colliery Company and Makomo Resources.

Sadly, since local demand of the commodity is softening on the local market, there is now a renewed push to export.
Well, statistics have shown that while demand for coal is dropping, demand for fuel still remains resilient.

This presents Government with an opportunity to convert coal into diesel.
South Africa, which during the apartheid era was slapped by sanctions from the international community, has become the leading producer of oil from coal through Sasol, a state-owned company.

Over the years, the company has built several coal-to-liquids plants in South Africa and is currently assisting China to build its own plant.

Sasol uses proprietary technology to make jet fuel, gasoline and diesel from coal. It has assets in Mozambique, Qatar and Iran, and has actively pursued projects in Nigeria and Qatar.

Similarly, the United States of America is pursuing this path in order to diversify its energy sources and switch from the present reliance from fuel from the Middle East.

The US Energy Information Administration claims that since 2004 the use of coal as a global energy source has caught up with the use of natural gas, and would even surpass it by 2030.

So, Government really needs to put into effect measures to promote value addition of the mineral. At one time, South African firm LontohCoal made elaborate plans to invest more than US$9 billion in Zimbabwe for its coal-to-liquids plant and a coal slurry pipeline at its Lubimbi coal project in Matabeleland North.

The company’s chief executive, Mr Tshepo Kgadima, claimed that of the US$9 billion investment, US$7,5 billion was earmarked for the coal-to-liquids plant which was supposed to produce about 50 000 barrels per day (bpd) and create 5 000 direct permanent jobs.

It is estimated that Zimbabwe consumes about 13 000 bpd of liquid fuels per day. Consumption is forecast to grow to 20 000bpd by 2017-18.

It was widely expected that Zimbabwe through the project would realise US$2 billion in foreign exchange savings, as the fuel would substitute diesel and petrol importation.

The project was expected to pay over US$9,8 billion to Government in royalties and taxes in a 20-year period, and procure goods and services worth US$41 billion in the period.

This shows the viability and material benefits that could accrue from such an effort. All this needs to be actively pursued.

What happened to the methane gas project?
Of late the incessant power outages by the Zimbabwe Electricity Supply Authority (Zesa) have forced many consumers to switch to liquid petroleum gas (LPG) for energy.

The Southern African Power Pool (SAPP), a grouping of power utilities and stakeholders in the power business in the SADC region, warned of power shortages in the region more than seven years ago.

Despite this grim forecast, it seems nothing was done to explore alternative energy sources.
Zimbabwe has the largest known reserves of methane gas in sub-Saharan Africa and the Industrial Development Corporation (IDC) has been trying to develop the Lupane gas project.

For one reason or the other, the project has not taken off as yet. Zimbabwe has had to rely on LPG that is imported mainly from South Africa.

Had the country had a thriving gas industry, all the consumer spend in the sector might have been captured in the country’s finance system.

Instead, foreign suppliers are the ones who are benefiting. In this context, Zimbabwe’s inertia is quite breathtaking.
Why is NewZim Steel still mothballed?

Another mega-project with the potential of having a significant multiplier effect on the economy is the planned resuscitation of Ziscosteel. Although an agreement has been signed in principle between Government and Essar Africa Holdings Limited, three years down the line the project is still mothballed.

Revival of the steel making giant was expected to boost local infrastructure — rail, water and power. It is only hoped that policy makers will be both expeditious and judicious with this matter considering that Zimbabwe has been short of investors.

Black Granite
It is rare to come across conversations around the Mutoko black granite in mining circles simply because most locals do not associate themselves with it.

About 90 percent of the stone, which was classified as a mineral in 1990, is exported to South Africa, Italy, Argentina, the United States of America and some European Union countries.

Government only gets a meagre two percent in terms of royalties.
But the mineral has a high asking price on the international market, fetching more than US$600 per square metre.

Currently, there is no value addition or processing of the black granite at the quarry sites or at the growth point.
A fraction of the black granite that finds its way on the local market is processed into finished products such tomb stones, floor tiles, wall tiles and tabletops.

It begs the question: who is really benefiting from our minerals?
The same can also be said for diamonds and platinum.

There is urgent need to beneficiate our minerals so that we get the maximum possible value from them.
What is frustrating is that there is unanimous agreement on the path that we have got to take as a country, but there seems to be very little willpower to drive growth.

Thankfully, now there is a results based management system, and we hope it will work.

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