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Companies scale down operations

as … Severe coal crisis takes centre stage

Ngoni Chanakira

THE coal shortage is fast taking centre stage in industry and is the latest crisis bedeviling Zimbabwe.

It has joined other shortages such as those of foreign currency, electricity and fuel, as industrialists struggle to achieve optimum production levels to satisfy increasing product demand.

Companies requiring coal are now forced to reduce production and, in some cases, shut down operations completely.

Wankie Colliery Company Ltd (Wankie), Zimbabwe’s leading coal producer, says demand for coal and coke has remained firm in both the domestic and export markets.

Wankie said it has, however, failed to meet demand because of “major challenges” being faced.

Company chairman Ngoni Kudenga said these major challenges include foreign currency shortages and the consequent shortages of spares, unprecedented high inflation, price controls, an erratic supply of empty wagons by the National Railways of Zimbabwe (NRZ), and loss of “critical skills”.

Wankie’s managing director is Kudzaishe Bwerinofa.

For the period ending December 31 2002 Wankie made an operating loss amounting to $7,9 billion, which was marginally higher when compared to $7,8 billion recorded in the previous year.

Kudenga said coke sales for the year at 3 448 600 tonnes, were 302 818 tonnes or 8% lower than the 3 751 418 tonnes achieved in the previous year.

Wankie is operating at less than 50% capacity.

Companies that have had to alter their production levels because of the erratic coal situation include the Zimbabwe Sugar Refineries Ltd (ZSR), Circle Cement Ltd (Circem), Portland Pretoria Cement Holdings Ltd (PPC), Delta Corporation Ltd (Delta) and the entire tobacco industry.

The ZSR requires at least 100 tonnes of coal daily and an additional 100 tonnes to start up after shut down. The sugar plant also requires four days cover of up to 100 tonnes of coal.

In an interview ZSR managing director Pattison Sithole said the company was closed last week for some days because of the coal shortage but had now resumed operations.

Sithole said: “We had closed but we are now operating as best as we can. We are supplying customers all quantities produced under the circumstances.”

He could not, however, reveal the exact amount of sugar being produced per day.

He denied that his company was mooting retrenching workers or shortening their hours as a result of the erratic coal supply.

The ZSR gets its sugar cane from Hippo Valley Estates Ltd (Hippo).

For the year ended December 31 2002 a total of 284 100 tonnes of sugar was produced by at a cane to sugar ratio of 8,17:1, which compared with 248 600 tonnes produced in 2001 at a ratio of 8,19:1.

Hippo chairman Len Bruce said sugar production in 2003 was likely to be some 30 000 to 40 000 tonnes lower than the 284 100 tonnes produced in 2002.

This should worsen sugar stocks on the market further fuelling the commodity’s parallel market price.

Cement manufacturer Circem last week said it had one month of coal supply left in its reserves. The company threatened that it could shut down anytime – only a month after having reopened – because of the coal shortage.

Circem also said the controlled price of $511 was far below the cost of production by at least 40%.

This has resulted in major projects either being shelved or delayed almost doubling their final cost.

One such project is the Joina Development Centre in Harare’s central business district. The centre, slated to be the most prestigious in Zimbabwe, has remained stagnant for more than four years now because of cement and foreign currency shortages.

The project is the brainchild of prominent business tycoon and TA Holdings Ltd chairman Shingai Mutasa.

The NRZ is supplying Wankie with only 66 wagons instead of the promised 150 per day, further crippling operations at the financially troubled mining company.

The NRZ says it cannot cope because it has a shortage of wagons, some of which are worn out. The railways are facing serious spare parts shortages and are basically operating under severe strain.

Last year the NRZ was asked to transport maize supplies sourced from neighbouring South Africa to try and solve Zimbabwe’s food crisis.

Maize transportation was immediately declared a “top priority” by the cash-strapped NRZ, taking its cue from government.

Kudenga said: “Inadequate supply of empty wagons by the National Railways of Zimbabwe adversely affected the supply of WCC coal to the market. Under normal circumstances NRZ should supply 150 railway wagons per day.

“However a daily average of 66 wagons was supplied, which is only 44% of normal requirements. Consequently, customers continued to use road transport resulting in 45% of WCC coal being moved by this mode of transport.”

Another affected company, Delta said its soft-drinks sector was in desperate need of sugar for production to satisfy increasing demand.

The company says it has had to go for months without its regular refined sugar consignment from ZSR.

ZSR, like the other companies, also blamed the coal shortage for its failure to supply the market with adequate sugar.

ZSR’s Sithole said they were trying “and supplying sugar to all companies including Delta when production was not disrupted”.

Wankie, meanwhile, says its efforts to solve the situation were affected by the existence of a vibrant parallel market resulting in a huge escalation in costs of commodities and services.

The mining company says this instability on the foreign exchange market was threatening the survival of most businesses, which rely on imported inputs but do not earn significant amounts in foreign currency.

Wankie’s serious cashflow problems have resulted inthe firm failing to pay a divided to shareholders for the past two years. The company’s share price has, however, remained firm at $18 for the past month. Analysts said this was due to a US$5,3 million investment promised by the Afreximbank.

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