Steel Industry in DRC

The Steel Industry in DRC

Maluku Steel Plant , image from Mining Technology.com

The Democratic Republic of Congo has the world`s largest deposits of natural rescources, with such potential it can become the economic giant of Africa. Given this nation`s troubled history and given our ability to learn from the past, the people of Congo are presented with the opportunity to establish a new standard of human dignity and progress that can issue into the Great Lakes Region the genuine spirit of the African Renaissance in a world that is entering a new paradigm centered on the upliftment of mankind.

China is offering the world a new paradigm based on development .China is offering a win-win partnership to all those who choose to take part in the Belt and Road Initiative , a resurrection of a once magnificent trading route that encompassed the globe and known as the Silk Road. For African states this is the light at the end of the tunnel, it is the offer of technological assistance and the colossus of China`s ability to build engineering projects that unite not divide that deliver not exclude and that are a basis of their increasingly prosperous economy. This investment by China in its physical economy has resulted in the upliftment out of dire poverty of 700 million Chinese people. The government intend to completely erradicate low living standards for its entire population within the next few years.

If China`s economic miracle can achieve this, then why can`t 700 million Africans be lifted out of poverty and poverty eradicated in an even shorter time.With the geo-political theatre coming to a close and the old colonial mindset no longer successfully wielding its weapons of war, we stand on the brink of a new era that no longer encompasses identity politics, oil wars and resources wars, austerity and hopelessness. We stand on the brink of a better world where the dignity of mankind is paramount.

Steel Production

The DRC currently exports all of its mineral resources which account for 90% of revenue. That is an economic crime! The vast majority of the value is lost in exporting as a raw material .The profit goes elsewhere and the benefits of the country`s resources are lost to the nation. The DRC needs to process and manufacture instead of mining and exporting its wealth.For this to come about, focus needs to be on developing a world-class steel industry. Steel production is a true indicator of economic health because it is an indicator of productivity.China is the world`s largest steel producer; 50.3% of global steel production (2015) because China has chosen to differ from the West and base its economy on sound economic principles such as the investment in the physical economy (infrastructure) . A successful economy is a productive economy, an economy that is based on manufacturing,an industrialized economy .

Steel is the essential component of manufacturing.Steel is made from iron ore. The processing requires vast amounts of water and electricity.Good infrastructure is a key component.

Maluku Steel Plant is currently the only steel plant in the country and it is not in full use.Maluku needs reviving and other plants need building. Given the size of the DRC, each province should have a steel plant that will enable the country to meet its own steel requirements in industry and infrastructure.At present Maluku is 375,000 square foot of wasted opportunity.

Maluku steel production needs can be met by the Congo River and the hydro-electric from the Inga Dams. Inga III is also under construction. At present the DRC also exports most of its electricity derived from hydro power.

There are iron ore deposits in Oriental Province and Katanga and Kasai districts. Neighbouring Central African Republic, Republic of Congo and Uganda all have known iron ore deposits.Elsewhere in Africa, Sierra Leone has at least 2 iron ore mines and is a region known to have vast deposits as does neighbouring Guinea where the world`s largest deposit ( at least 25%) of a particularly high grade ore have been found in the Nzérékoré Region of Simandou mountains.

Currently Guinea exports all of its iron ore and like most of Africa functions as a raw materials market. Guinea`s iron reserves should become the epi-center of a thriving West African steel industry. At present Nigeria has the most potential to be the local driver for this.In 1971 General Yakubu Gowon created the National Steel Development Authority with the economic vision back then of making Nigeria a global steel producer with an industrialized economy which by now should be world class. However it has been allowed to stagnate with no technological progress .It should be producing high-tech goods as well as supplying all West Africa`s steel requirements. The reason it has been allowed to stagnate is the over-reliance on revenue from oil. At present steel production only accounts for 0.3% of GDP. Nigeria has massive mineral wealth but imports processed minerals that could be processed locally. Pres. Buhari has committed to reversing this trend and re-invigorating Nigeria`s steel production.Dr Kayode Fayemi , Minister of Solid Minerals Development, has pointed out that Nigeria will be needing vast amounts of iron and steel to build infrastructure.

With the continued industrialization of the economy in mind he said:” a steady increase in domestic demand for steel in Nigeria in the next decade, which would be driven by ever-widening demand for steel from both local and international investors who wished to participate in the expansion of Africa’s largest economy.” Source:

Nigeria’s Ajaokuta steel plant: better late than never?

Africa is at a pivotal point in history. With China`s African development plans including massive infrastructure projects, the demand for steel in the continent will soon be at an historic high.

Chinese infrastructure commitments grew at an average annual rate of 16 percent from 2012 to 2015 and supported many of Africa’s most ambitious infrastructure developments.9 For example, China EXIM Bank financed more than 90 percent of the $3.8 billion Mombasa-Nairobi Standard Gauge Railway in Kenya, while Chinese institutions also financed most of the $1.7 billion Karuma Hydroelectric Power Station in Uganda.10

Chinese contractors today account for nearly half of Africa’s international engineering, procurement, and construction (EPC) market.11 Six of the ten largest international EPC contractors operating in Africa are Chinese: China Communications Construction, China Railway Group, Sinohydro Group, China State Construction Engineering Corporation, China Railway Construction Corporation, and Citic Construction Company.12 A recent large-scale public opinion survey found that infrastructure development is African citizens’ most appreciated aspect of Chinese involvement in Africa. “Source:

https://www.mckinsey.com/global-themes/middle-east-and-africa/the-closest-look-yet-at-chinese-economic-engagement-in-africa

Egypt is the 27th biggest global steel producer. Egypt is in the process of building its first nuclear power plant with technical assistance from Russia. The el- Sisi government is taking Egypt into the new paradigm by developing the physical economy. The construction of the second Suez Canal was a revolutionary event, a cornerstone of the new paradigm in Africa. It was constructed on credit , by the sale of bonds to Egyptian citizens. At present 90 million people live on 5% of the land. Egypt will be able to support a much larger population than it can at present with advancement in infrastructure and agriculture which will open opportunities for the remaining 95% of Egypt.

Ethiopia is taking the lead in East Africa:

the government has followed a deliberate policy of industrialization since 2010. This strategy has been underpinned by close cooperation with China and has drawn lessons from China’s own success at driving manufacturing-led growth. As a result, Ethiopia has increased its manufacturing value added by an average of more than 10 percent a year since 2004 and become one of Africa’s fastest-growing economies……………Ethiopia has drawn on Chinese investment and expertise in several major aspects of its industrialization and broader economic development. It has engaged the Chinese government to finance key infrastructure, helping to add 66,000 kilometers of new roads since 2000 and increase power supply by 15 percent between 2010 and 2014.36 Chinese firms built, and now co-manage, the 750-kilometer Ethiopia-Djibouti Railway, a $3.4 billion project opened in late 2016. ” Source:

https://www.mckinsey.com/global-themes/middle-east-and-africa/the-closest-look-yet-at-chinese-economic-engagement-in-africa#0

Last year Pres Nkurunziza opened a $32 million steel plant in Musumba which will employ more than 1500 people. The steel mill was built by a Burundian investor and will operate 24/7. A very proud moment for the nation and Pres Nkurunziza!

http://glpost.com/while-kagame-was-spending-20k-per-night-in-ny-president-nkurunziza-was-opening-a-32m-complex-steel-mill-in-musumba/

Mineral revenue is doing to the DRC what oil ( Royal Dutch Shell) did to Nigeria until the welcome administration of Pres Buhari.

In terms of steel, the DRC has been exporting scrap iron to a South Korean company in a bid to bring in quick revenue. Katanga province has been opposed to this and for a time prohibitted the sale of scrap metal on the grounds that it deprives local industry from raw materials and encourages the theft of electric cable . Sotrafer SARL, a privately-owned company in Lubumbashi, Katanga has been using scrap metal to produce high quality TMT steel bars.

New innovations at the cutting edge of technological advance are expanding all possibilities:

http://www.micindustries.com/solutions.htm

The DRC government have shown interest and apparently have bought one of these “mobile steel factories” which can go anywhere and construct anything from dairy sheds to storage units and factory buildings.This state of the art steel construction process can contruct a 1000 square meters in a single day!

With advances in technology the economy is an ever evolving science and what was seen yesterday as impossible and costly soon changes into limitless potential.

The DRC has reserves of every known mineral including uranium.If instead of exporting all of its natural resources, the DRC developed a world class steel industry it could then follow the example of Egypt and develop a nuclear facility. If the steel industry was powered with home produced uranium nuclear energy then this breakthrough in technology would put Congolese steel production on the global cutting edge of competition.

South Africa`s steel industry is currently suffering, unable to compete with Chinese prices. The government has increased import tariffs but this has not stopped the recent loss of thousands of jobs such as those at Evraz Highveld Steel and Vanadium Limited.

South Africa is an extremely innovative culture and has an excellent history of technological advancement in many fields. South Africa was the first country to produce oil from coal! Rather than viewing China`s low steel prices as the downfall of its own steel industry, South Africa could rise to the challenge of being the first in the next step of technological advancement for the production of steel to make its steel more efficient to produce than Chinese steel.

State-owned or PPI ?

What is at stake here is the question of who and what for, is the development of the DRCs industrial capacity? The answer is the development of the economy. But what is` the economy`? The country at present has one of the fastest growing economies world wide and yet the nation remains one of the poorest. GDP does not reflect on the lives of the vast majority of its 84 million citizens most of whom are young and unemployed.

Current economic thinking relies on the “trickle down effect” that foreign investment in a under-developed country is catered for with a relaxed, liberal economic climate that attracts foreign investment to build industry. This approach continues to be the focus of development in much of Africa.Its track record is disastrous and any in -depth look at countries like Mozambique (Mozal) , Zambia (Glencore), South Africa (AngloAmerican) and many others is concrete proof that the economic norm does not benefit the population in general.There is no trickle down effect.

Public-Private Partnerships pay for development but the social benefits are regarded as a spin-off, the local population get the crumbs. Africa must follow in China`s footsteps and revolutionize its current economic thinking.

Modernizing and industrializing the economy of DRC relies on electricity. Current (Western ) economic thinking focusses on the cost of projects. But the reality is that the economic benefits of industrialing the economy will so dramatically change the economy`s development that the initial cost will in a few years, look like a very insignificant amount. Investing in the future is priceless when that investment is in the development of the nation`s economy and when the economy is regarded not as a `stockmarket game` but the nation`s future and well-being.

Maluku Steel Plant and developing the DRC`s steel industry cannot be regarded as a private sector opportunity for future-profit investment. This is a national investment for the nation.Likewise providing the entire country and much of southern Africa with electricity is a national investment in the nation, future generations and the future energy requirements of much of southern Africa. Such a critically important role cannot be fulfilled by a privately owned corporation that is answereable to its shareholders and not to the future generations of Congolese.

If there is public-private partnership investment for steel production or utility services like electricity then it is based on a profit making/monetarist system. Is the value of that steel or the value of electricity measured in how much can be charged to the consumer/customer?

What is the value of a state owned steel plant or the value of the state investing in supplying all areas of the DRC with electricity? That value can`t be quantified, it can`t be measusured in terms of what it would cost today.The economic progress that would result has a qualitative value not a measurable quantitative value. Improving the lives of the Congolese nation is the best investment its government could ever make.