Africa Chrome Fields (ACF), which is owned by non-listed South African company Moti Holdings, caused a stir in 2014 when it announced that it would sink over $200 million into a mining project in Kwekwe that was expected to produce around 10 000 tonnes of ultra-low carbon ferro chrome per month within 11 months.
Moti Holdings, according to Africa Mining, bought ACF for $3 million with $1 million only paid in 2014 after ACF secured an environmental permit for the Zibagwe project.
The company started operations in Chinyika Ranch, some 68km outside Kwekwe using new technology to smelt the chrome called the Exothermic (Alluminathemic) process, a year later.
Last week Vice-President Emmerson Mnangagwa, who was influential in the setting up of the project, visited Chenyika Ranch to assess progress. He was accompanied by Information and Communication Technology minister Supa Mandawinzira, Defence minister Sydney Sekeramayi, Air Force commander Air Marshal Perence Shiri and Zimbabwe Defence Forces commander General Constantino Chiwenga.
Our reporter Blessed Mhlanga (BM) spoke to ACF senior executive Ashruf Kaka (AK) during the tour about the company’s future plans and why it chose to invest in Zimbabwe at a time when foreign investors were giving the country a wide berth. Below are excerpts of the interview.
BM: The Moti Group is operating in Zimbabwe where it owns a big stake in Africa Chrome Fields. There has been a lot of speculation around the group, may you shed light on your operations in and outside Zimbabwe.
AK: The Moti Group has diverse business interests and over the past two decades has invested in mining, beneficiation, mining technology, transport and logistics, legal compliance and governance, risk management, company secretarial, finance products, security services, aviation, property development, property [residential, commercial and industrial leasing], motor vehicles [trading and finance]. The group’s focus in Zimbabwe is chrome beneficiation at this stage.
BM: Why did you invest in ACF when it seems most chrome smelting companies in the country are folding?
AK: We cannot comment on the other chrome smelting companies and how they are operating, including their cost and operational structures. We concentrate on a model of optimisation and introduction of specialised technologies to reduce costs to allow for sustainable growth during tough times and good profits during better times.
We have moved away from the colonial models of having huge centrally located plants to mobile plants which meet African requirements based on available infrastructure.
BM: You have been on the ground for almost two years now, can you tell us about the progress that you have made as a company.
AK: Our growth has been exponential in that we have established 16 spiral plants on six sites in less than 12 months and we anticipate this to grow to 19 spirals on seven sites by the end of 2017.
The aluminothermic plant will be complete within the next 12 months, which has already been substantially developed from a construction perspective and awaits an EIA [environmental impact assessment] approval, which is pending.
In addition thereto, we have two 15 tonne electric arc furnaces, onsite, which we intend commissioning within the next 12 months, subject to Zesa supplying adequate and sustainable electricity of 34MVA.
In addition to the above, the support infrastructure of roads, dams etc have also been established, including accommodation and office infrastructure such that it operates a mini city catering for 850 employees currently.
BM: The operating environment in Zimbabwe has been described as hostile and government has been making moves to improve the ease of doing business. Tell us about the challenges that you have faced as investors.
AK: Our experience in the business environment in Zimbabwe has not been hostile. We have had challenges and those challenges have been met with co-operation and assistance from the government.
Where there has been resistance or “red tape” which debilitates progress, we proactively engage the requisite authorities to unlock the difficulties and we have been successful to date.
We have also engaged Finance minister Patrick Chinamasa and have presented to him a memorandum to assist in finding ease to do business in Zimbabwe and the challenges faced from time to time.
BM: Why have you chosen to invest in Zimbabwe and bring in direct foreign investment at a time when there is investor flight and the talk of sanctions has been a huge deterrent for many investors?
AK: Zimbabwe is a neighbour to South Africa where the group has other interests in beneficiation, including chrome and [platinum group of minerals] PGM’s. The geographic location of Zimbabwe made sense as well as the abundance of quality resources that it has.
Resources in Zimbabwe don’t only extend to the natural resources but also extends to the people of Zimbabwe who are extremely hospitable, educated and supportive of the project. The work ethic is acceptable on international norms to allow sustainable growth of the project.
All investors look for sustainability and clear direction and policy from the government. We are not politicians and we are in business and we leave politics to politicians and deal with business on its merits.
We have a long term view over Zimbabwe as a result of the relationships that we have cultivated with the people of Zimbabwe and we believe that this is sustainable in the long term as it is beneficial to both parties.
BM:Your group chairman, Zunaid Moti spoke of injecting nearly $200 million into ACF, how much have you invested so far and how much does ACF contribute to the group’s revenues?
AK: I think instead of looking at the investment of ACF, one should be looking at the requirement to increase the country’s GDP [gross domestic product]; this can be expressed through an increase in the amounts of goods and services.
The components of GDP includes the increase of investment capital and in this regard, we are committed in doing so, as indicated by the chairman Zunaid Moti.
Part of this requirement by the government is expenditure on infrastructure particularly electricity to allow for growth in the GDP.
The other driver is increasing the consumer spending and this can be achieved through the employment created by ACF.
We are currently employing 860 people and this will increase substantially over a period of time and increase consumers spending from disposable income. Another key driver for the GDP is the increase in net exports and in this regard, the product variety of the beneficiated product that we intend exporting will certainly be a key factor in the increase of net exports in Zimbabwe.
BM: Let’s talk beneficiation. Currently you are exporting raw chrome fines and there is talk of you building a beneficiation plant which involves a smelter, can you walk us through it.
AK: Beneficiation is a requirement, particularly in earning foreign income. This depends on sustainable production and on consistent specifications. One is also required to have a variety of different product lines in order to maximise the beneficiation.
Apart from the aluminothermic process [which does not require electricity], it creates one product. The electric arc furnaces and further beneficiation will allow for the beneficiation of a variety of different product specifications of ferrochrome required by the international market.
Sustainability of any business requires versatility and diversification in order to meet market requirements.
BM: Your operations are currently running on diesel because you have no electricity. How does this affect your operations and have you engaged government to have this solved?
AK: As indicated on previous occasions, electricity at the right price, allows for sustainable growth. In the absence of electricity, one is forced to use alternative energy available and in this instance, the utilisation of generators are the only alternative.
We are fortunate in that we have obtained rebates from the government in regard to our diesel requirement and this to an extent alleviates the negative effects on costs.
However, the long-term solution will always be sustainable electricity supply in order to effectively compete in the world market.
BM: What are your future plans concerning investment in Zimbabwe?
AK: The investments in Zimbabwe were made after careful thought and consideration on a long-term basis. It would be disingenuous to have a short-term plan and exit from Zimbabwe.
We have a relationship with the people of Zimbabwe and have formed formidable alliances, for a prosperous future with Zimbabwe and its people.
BM: Can you shed light on your corporate social responsibility activities?
AK: Corporate social responsibility is intertwined with development of the project and as such, we have a number of plans in place in this regard.
We are interacting with the local stakeholders and politicians to plan out the requirements for the immediate geographic surrounding area to ensure that the corporate social responsibility is applied where it is most needed.