• NRZ faces a $431 million investment to establish a rail link to Manhize steel plant
  • Manhize steel plant is poised to become the largest steelworks in Africa
  • It plans to produce 600k tonnes of pig iron in the initial phase
  • The project is expected to employ 3,000 workers in the initial phase, scaling up to 10,000 employees and 50 000 by 2026
  • It is projected to generate $6 billion in export earnings by 2026

Harare- The National Railways of Zimbabwe (NRZ) faces a daunting challenge in supporting the country's economic recovery and the ambitious Manhize steel project. With equipment and infrastructure long past its prime, NRZ requires a staggering US$431 million investment to establish a crucial rail link to the new Manhize steel plant, which has just commenced operations.

The statistics paint a stark picture - the last set of wagons was purchased in 1992, and many of the few remaining locomotives are 40 years old, nearly double their intended lifespan. This lack of recapitalization has crippled NRZ's performance, with business volumes plummeting from 12 million tonnes annually in the 1990s to a mere 2.3 million tonnes today.

The Manhize steel plant, developed by Tsingshan's Dinson Iron and Steel Company near Chivhu, is ramping up production. In the initial phase, the facility plans to produce up to 600,000 tonnes of pig iron. By the end of the year, the company intends to expand output to include steel billets and bars. Reliable rail transportation is essential for the plant to efficiently distribute its products domestically and for export. The Manhize operation is poised to become the largest steelworks on the African continent, reviving the industry after the decline of the formerly dominant ZISCO steel complex.

The historical context highlights the pivotal role the steel industry once played in Zimbabwe's economic development, and the challenges it has faced in recent decades that have eroded that position. Historical data indicates that steel exports comprised approximately 10-15% of Zimbabwe's total export revenues during the 1980s and late 1990s. Industry sources estimate that Zimbabwe currently spends over $200 million annually on steel imports.

With nearly a billion dollars lost on importing steel and related products, Manhize's projected 600,000 metric tonnes of domestic production this year will lower the 1.2 million metric tonnes of imports required, resulting in a savings of more than one-third on the country's foreign imports.

In the second phase, Zimbabwe will be producing an excess 100,000 metric tonnes for exports. In the third phase, which is likely to occur by late next year, Zimbabwe will be exporting over 1.2 million metric tonnes, saving up to $200 million and $1 billion per annum on its imports bill. This will not only anchor economic growth, but also bolster the country's U.S. dollar reserves, facilitating greater currency and exchange rate stability.

This underscores the critical importance of the Manhize Steel operation for the Zimbabwean economy. Once operational, the plant is projected to reduce Zimbabwe's foreign steel imports by more than $500 million. In the first quarter of the current year, Zimbabwe imported 64,322 metric tons of steel worth $61.2 million. This included 20,954 metric tons worth $18.5 million in January, 21,483 metric tons worth $22.5 million in February, and $20.2 million in March. These statistics indicate Zimbabwe is losing an average of $40 million per quarter, or a lower of nearly $200 million annually, on steel imports.

The Manhize project is expected to employ 3,000 workers in the initial phase, scaling up to 10,000 employees in the final phase. The sector is forecasted to generate $6 billion in export earnings by 2026 while creating 50,000 new jobs. This makes the Manhize Steel project a fundamental tool for driving Zimbabwe's economic growth, which is projected to exceed $12 billion in the industrial sector.

The NRZ's fleet renewal and infrastructure upgrade requirements include the procurement of 21 new locomotives and 2,650 freight wagons and must rehabilitate an 80 km segment of rail line between the Dabuka siding in Gweru and Mvuma. A new 50 km rail link is also needed to connect the Manhize steel plant to the NRZ network at Mvuma.

Zimbabwe is seeking to leverage its mining sector as a driver of economic recovery, but the government's failure to invest in the national rail infrastructure is jeopardizing these ambitions.  The foundations of Zimbabwe's steel industry were established in the 1930s, with the formation of the Rhodesian Iron and Steel Commission in 1942 to oversee industry development.

Major steel production in Zimbabwe began in the 1950s with the construction of the Redcliff steel plant, which would later become the Zimbabwe Iron and Steel Company (ZISCO).  After Zimbabwe's independence in 1980, ZISCO underwent significant capacity expansions and grew to become the largest integrated steelworks in sub-Saharan Africa outside of South Africa. By the late 1970s, ZISCO was producing over 1 million tonnes of steel annually.

In the 1980s and 1990s, ZISCO was a critical component of Zimbabwe's industrial sector, employing over 5,000 workers. At its peak in the 1990s, the steel industry accounted for around 1% of the country's GDP. This enabled growth across manufacturing, infrastructure development, and consumer goods production nationwide.

Due to insufficient government investment in rail infrastructure, mining companies in Zimbabwe have been compelled to privately fund the repair and rehabilitation of the NRZ dilapidated locomotive fleet and rolling stock. The deterioration of the rail network has forced these companies to shift towards the more costly option of road transportation, which has in turn exerted significant strain on the country's road infrastructure.

In order to efficiently deliver their products to customers, Zimbabwe's burgeoning mining sector is now directly investing its own capital to restore the functionality of NRZ's ailing trains. This is in stark contrast to the approaches taken by neighbouring countries such as Mozambique, South Africa, Namibia, Tanzania, Kenya, and more recently, Zambia, where the respective governments are directly funding the revitalization of their national railway companies.

Major ferrochrome producer Zimasco plans to invest $2.46 million to refurbish 100 railcars and 6 NRZ locomotives. In return, these rehabilitated assets will be dedicated to Zimasco's freight operations, though available for other customers when not in use by Zimasco. Similarly, coal companies have proposed to allocate $14.8 million towards wagon refurbishment to facilitate the transportation of coal to the port of Maputo. NRZ has engaged in analogous arrangements with other industrial players, such as ZimGas and the logistics firm Strauss.

In May, the Zimbabwean Transport Minister Felix Mhona informed the Senate that NRZ is negotiating $500 million in financing from China International Group and $115 million from Afreximbank to recapitalize the national rail operator. Previously, NRZ officials have stated that the last acquisition of new rolling stock occurred in 1992, and many of the few remaining functional locomotives are over 40 years old - nearly double their intended service life. As a landmark development, last year Indian engineering company RITES signed an $81.2 million contract to supply NRZ with a new fleet of diesel locomotives and railcars, Zimbabwe's first major procurement of rolling stock in decades.

These private-public partnerships and external financing arrangements emphasize the critical need for substantial investment to rehabilitate Zimbabwe's deteriorating rail infrastructure and rolling stock in order to support the transportation requirements of the country's key industrial sectors.