Zimbabwe: Delta Resorts to Coal Imports From SA

Source from:  Financial Gazette (Harare) 12 September 2007 09/14/2007

LOCAL companies have resorted to expensive coal imports from South Africa due to escalating shortages on the local market, primarily supplied by Hwange Colliery Company whose deliveries have declined to precarious levels, The Financial Gazette can report. Production capacity at most industrial operations in the country has plumbed fresh depths, severely undermined by the erratic deliveries of the critical industrial mineral. A senior executive with Delta Beverages told The Financial Gazette during a tour of the company's operations in Harare last week that the beverages manufacturer has been forced to resort to expensive coal imports from South Africa because of inadequate domestic supplies. South African coal costs $40 million per tonne while that from Hwange, in which the government holds a 38 percent shareholding, costs at most $14 million. "We are importing coal from South Africa at US$40 million per tonne. But Hwange supplies at $14 million per tonne. However, their supplies have been erratic," Tongai Mukanganise, a plant manager at Delta's Harare brewery, told The Financial Gazette. Besides industrial operations, the majority of agricultural activities, particularly tobacco farming, have suffered immensely from the poor domestic coal supplies and have resorted to the costly imports. Foreign coal suppliers have changed their supply terms and are demanding cash for purchases by Zimbabwean companies due to the growing default risk caused by acute foreign currency shortages in the country. Hwange, whose coal reserves are estimated to be enough to last 500 years, is facing viability problems, which have hamstrung operations and affected operational capacity. Ideally, the coal miner should supply 380 000 tonnes to the local market every month. Some of the companies importing coal have been buying the foreign currency from the parallel market, where the Zimbabwe dollar has slid against the South Africa rand, increasing the Zimbabwe dollar cost of the coal purchases. Logistical constraints, such as high transportation costs and inefficient road and rail transport, have compounded the coal importers' woes. Harare Breweries' clear beer manufacturing plants require about 40 tonnes of coal per day. But the plants have been missing a cumulative four days of production per month due to the combined effects of erratic coal supplies and power outages. Coal is needed to fire boilers that produce steam during the manufacturing of alcoholic beverages. Two week ago, Hwange Colliery Company's managing director, Fred Moyo, told The Financial Gazette that the coal supply situation had degenerated into a crisis. "We are trying, but it is not easy when the company runs into cash flow constraints," he said. Hwange requires at least US$60 million to replace its ageing equipment and boost production. Last week, Finance Minister Samuel Mumbengegwi seemed to ignore the problems at the company, giving a highly positive report of the colliery firm. "Notwithstanding periodic interruptions to production, coal mining continues to benefit from the recapitalisation of Hwange Colliery undertaken in 2006," said during his presentation of the mid-year fiscal policy and supplementary budget. "(Coal) output for the year is expected to grow by 16 percent from 2.1 million tonnes last year to 2.4 million tonnes this year," Mumbengegwi said. But the tour of Delta's three plants in Harare revealed that the serious capacity constraints, caused by the energy crisis and foreign currency and fuel problems, was threatening to floor companies. Delta's opaque beer plants require about 250 000 tonnes of coal per month. Supplies had been averaging 120 000 tonnes. "We are leaving from hand to mouth," said Doubt Taranhike, the Northern Region manager for Harare Breweries. "We are getting coal from Sengwa Mine in Gokwe, but it is of very poor quality. We are also receiving supplies from Thuli Mine in Beitbridge," Taranhike said. At the Coca Cola production plant in the Graniteside industrial area, managers said they needed at least US$12 million per year to import concentrates alone, but the availability of the hard currency had been a "very limiting factor to production". Enditem