ZIMBABWE’S ailing iron and steel manufacturer, Ziscosteel, could have been fleeced of billion of dollars through underhand deals by senior managers who allegedly und
erpriced exports in exchange for kickbacks.
Ziscosteel has over the years failed to operate at full capacity due to breakdowns at its blast furnaces and undercapitalisation. The sorry state of the parastatal has however been exacerbated by corrupt tendencies in the export of steel which has been sold at below the market price to South African companies.
There are also allegations that molten steel is being deliberately spilled so that it can be sold as scrap metal. The “spillage”, known as “pool iron”, is exported to South Africa for prices well below the cost of production.
Ziscosteel deputy chairman Jonathan Kadzura on Wednesday confirmed that investigations into unethical activities at Ziscosteel were being carried out but could not give further details.
“We appreciate your concerns but internal investigations have already started,” said Kadzura. “We have NECI who started work this week and until they have finished their investigations it will be sub judice to comment further.”
The probe, sources said, might also include the role of senior managers of the Minerals Marketing Corporation of Zimbabwe, entrusted with marketing minerals and mineral products.
The Zimbabwe Independent can reveal that until last month, Ziscosteel was manufacturing steel lengths for export to Macsteel of South Africa. The 20-foot lengths of nine-inch steel were being exported for US$180 ($1 116 000 at the auction rate) a tonne instead of the market price of $400 ($2 480 000) a tonne. Steel prices have been firming in the last three months.
Sources said the steel was being sold at way below production cost. The Independent this week heard that senior managers in the marketing department were turning away prospective steel merchants who wanted supply contracts with Ziscosteel. There are also allegations that the managers have been showered with gifts from “South African friends” benefiting from the under-invoiced steel.
Ziscosteel’s acting general manager Alois Gowo last month ordered a revision of the price of steel to US$400.
Chris Lacy, a trader at Macsteel International yesterday said the price increase was “crazy”.
“We have been buying steel from Zisco for five years,” said Lacy. “Noone would sell it at that price. The latest increase is exorbitant. It’s not in line with international market price levels. Even if it covers C and F (cost and freight), it’s still too high.”
Sources said the other leakage was in the disposal of pool iron.
Ziscosteel has a contract with another South African company, Reclamation Ltd, whose job is to recover metal spills and export it to South African foundries. A tonne of pool iron was being sold at R250 ($237 500) — which is less than the cost of iron ore, limestone and coke used to produce it.
Reclamation was then selling the “scrap” iron to South Africa’s steel giant Iscor, Vereeniging, at R1 000 ($950 000) a tonne.
Reclamation chairman Dave Kassel yesterday confirmed through his personal assistant that they had been buying iron from Zisco.
“He (Kassel) confirms that Reclamation has been buying steel from Zisco from time to time,” the personal assistant said. The company said it has been dealing with Zisco for the past 14 years and has been buying steel at market prices.
But insiders this week said thousands of tonnes of scrap metal had been exported to South Africa and the spillage figures were shocking.
“Accidental spills occur from time to time and the worse run a steel plant is, the more spills there might be,” sources at Zisco said.
“Nevertheless, no matter how badly run the plant is, when hundreds of truckloads of pool iron have crossed Beitbridge the supply dries up and what do they do? Pour perfectly good metal on the ground on purpose,” the source said.
Attempts by government to turn around the fortunes at Zisco have in the last five years failed due to a number of problems, which include poor capitalisation, shortage of raw materials, and poor management practices. Former managing director Gabriel Masango is currently on forced leave.