STEEL AND TRADE IN SUB-SAHARAN AFRICA
PAPER PRESENTED AT THE 4TH REGIONAL MEETING ON TRADE IN STEEL PRODUCTS
ORGANISED JOINTLY BY THE ARAB IRON AND STEEL UNION AND THE JORDAN STEEL COMPANY
HELD AT AMMAN, JORDAN ON 3RD TO 5TH JUNE, 2002
DR SANUSI ALHAJI MOHAMMED (FNMS)
AFRICAN IRON AND STEEL ASSOCIATION
In responding to the call to present a paper at this 4th Regional Meeting on Trade in Steel Products being organised between the Arab Iron and Steel Union and the Jordan Steel Corporation holding in Amman, Jordan, is a good opportunity to discuss on steel and trade in sub-Saharan Africa as I am sure that the northern part of Africa is going to be suitably covered by the Arab Iron and Steel Union.
In this paper, analytical view on the reality and future of the industry as well as trade in the sub-region and other issues of importance are covered.
Inspite of all the attempts by the World Bank and International Monetary Fund (IMF) to halt the industrialisation in some developing countries which is intended to perpetually make the developing nations a dumping ground for steels from the developed countries, some developing world countries have been able to lift their economies away from poverty and starvation, and seriously threatening the developed world in economic well being. A few examples will suffice - South Korea, India, Pakistan, Egypt, Iran, Iraq, Algeria, Libya and Turkey, are some of these countries.
One will be saving a lot of space by avoiding telling the story of how each country went about achieving her own industrial base but suffice it to say that this has happened through the establishment of a viable steel industry. What is important however is that the steel projects in all these countries started as serious national projects, with their Governments taking an active interest in Steel development. Pandit Nehru of India once called the giant structures coming up in Bhilai, Durgapur and Ruerkehela in the late 50s as the “TEMPLES OF MODERN INDIA”.
Even Saudi Arabia, Algeria and Libya with their fabulous oil reserves have also developed viable Steel Industries and are still expanding them. Other third world oil producing countries with very well developed Steel Industries include Indonesia, Venezuela and Mexico.
It is important to note that one other parameter for measuring development is the per capita consumption of Steel for any nation, whether the economists believe it or not, not just GDP.
THE STEEL INDUSTRY IN AFRICA
South Africa has a fully developed steel industry and most of the generalisation that apply to most other African countries would be out of place when one is referring to South Africa.
The current annual combined installed capacity of existing integrated plants in Africa has been estimated at about 16.0 million tonnes and that for semi-integrated mini-plants at 1.7 million tonnes of steel. The total annual combined capacity of existing African production units (8 integrated, 29 miniplants and 45 rolling mills) is as follows:
Iron - 8.50 MT
Steel - 10.40 MT
Long rolled product - 8.00 MT
Flats - 3.30 MT
Pipes - 0.25 MT
Most of the integrated complexes came into existence after the 1960s. They underwent expansion and diversification to attain their present status during the following decades. Five integrated plants are based on the conventional blast furnace - oxygen converter route, whereas the three complexes inaugurated during the 1980s in Nigeria, Egypt and Libya are based on direct reduction - electric arc furnace route. The capacity of the individual integrated complexes vary from 0.19 million tonnes (Tunisia) to 2 million tonnes (Algeria) and 6.2 million tonnes (South Africa). Most of them produce mainly long rolled products with the exception of South Africa, Algeria and Egypt which also produce flats and tubular products.
Production with respect to the above integrated works represents about 50% capacity utilisation on the average. The Delta Steel Company in Nigeria, for example operates at a very low level of utilisation (15 - 20%) whereas a similar direct reduction plant (El-Dikheila Complex, Egypt) is operating at more than 100% of installed capacity.
Regarding semi-integrated miniplants, the spread is more uniform, with 15 countries having 29 miniplants comprising units ranging in size from 10,000/year in Mauritania and Ethiopia to over 200,000/year in Nigeria and Egypt. The average capacity utilization is about 25%. Invariably, bars, rods, wire and small profiles, which are commonly used in construction, constitute the products of these mini-plants. Production of flats is in South Africa, Egypt and Algeria and production of tubes exists in South Africa, Algeria, Egypt, Libya, Morocco, Kenya and Zimbabwe.
Algeria, South Africa, Egypt and Zimbabwe are the only countries that produce special grade alloy steel on the Continent.
Availability of Iron and Steel Natural Resources
The potential for the development of the iron and steel industry in African countries can be analysed by considering their existing natural resources including iron ores and alloying metal ores, fuels, reductants, energy, water and additives.
The Region as a whole has very large reserve of iron ore, manganese ore, chromite, cobalt and nickel ores, as well as substantial reserve of coal, natural gas, and oil, together with huge water reserves and hydropower potential for electricity production as well as availability of fluxes, clays and refractories.
Africa (excluding South Africa) has iron ore reserve estimated at over 34 billion tons (or some 15 percent of the world’s total), with 11 countries having reserve greater than one billion tons. The ore is distributed with 20.4 percent in Northern Africa, 40% in Western Africa, 24.5% in Central Africa and 15.1% in Eastern and Southern Africa.
The largest reserve occurs in the following areas:
- Kilomoto hematite deposit in Democratic Republic of Congo (5 billion tons)
- Manesi range low-grade deposit in Zimbabwe (3.3 billion tons)
- Gora Djebilet deposit in Algeria (3.025 billion tons)
Other large deposits occur in Angola, Cote d’Ivoire, Liberia, Libyan Arab jamahiriya, Mauritania, Nigeria and Sierra Leone.
Despite Africa’s extensive resource base, only a few deposits are being commercially exploited. Thus only Algeria, Egypt, Liberia, Mauritania, Morocco, Nigeria, Tunisia and Zimbabwe rank among the world’s iron ore producers.
Most of Africa’s iron ore resources remain largely undeveloped owing to such constraints as non-availability of the necessary investment resources from both domestic and international sources, the general sluggishness of the world iron ore market, the relative inaccessibility of many reserves (necessitating large investment in transportation and other infrastructures), and civil and political strifes that hamper development.
Liberia, Mauritania and Algeria are the only African exporters of iron ore. Egypt, Morocco, Nigeria, Tunisia and Zimbabwe produce for their domestic steel plants only.
Steel Alloying Minerals
Compared with other regions in the world, Africa is relatively generously endowed with several steel alloying minerals which include chromite, cobalt, manganese, tantalite, nickel and tungsten.
Africa alone accounts for about 95 percent of the world’s chromite reserve. Most of its production comes from Zimbabwe with proven reserves of over 500 million tons. Other significant reserves occur in Madagascar and the Sudan.
African’s share of the world’s cobalt reserves is about 33 percent with Democratic Republic of Congo and Zambia possessing respectively 75 and 20 percent of the regions reserves. Democratic Republic of Congo is the world’s leading producer. Other reserves occur in Botswana, Uganda (near Kilembe) and Zimbabwe.
Africa contains 78 percent of the world’s known reserves of manganese, most of which are exploited in Gabon (26% of world’s reserve) and Ghana. Significant reserves in Burkina Faso, Democratic Republic of Congo, Angola, Cote d’Ivoire and Togo are still undeveloped.
Nickel reserves in Africa amount to 10 percent of the world’s total, mainly in Burundi, Botswana, Ethiopia and Zimbabwe which is the largest producer.
Other alloying metals in Africa are tungsten (Democratic Republic of Congo and Zimbabwe), and niobium/tantalum (Democratic Republic of Congo, Mozambique, Zimbabwe and Nigeria).
Only a limited quantity of alloying elements is at present being used in a few African countries (Algeria, Egypt, Nigeria and Zimbabwe) for producing special grade and alloy steels. Ferro alloy production so far exists only in Zimbabwe, South Africa and Egypt.
The bulk of African coal reserves occur in Eastern and Southern Africa; Zimbabwe, Botswana and Mozambique are endowed with the most extensive deposits (85% of the Continental total). Only 18 countries have coal deposits and of these only Zimbabwe, Mozambique, Swaziland and Algeria have coking coal that can be used in blast furnaces.
Coal is produced in the following countries:
- Eastern and Southern Africa - Zimbabwe, Botswana, Zambia, Swaziland, Tanzania and Malawi.
- North Africa - Algeria, Egypt and Morocco
- West Africa - Nigeria and Niger
- Central Africa - Democratic Republic of Congo.
However, only Algeria, Egypt and Zimbabwe are using coal for coke production and iron making on a large scale. Nigeria has coke oven batteries that have been commissioned in 1992 but not operated commercially till date.
The largest natural gas reserves are in Algeria, Egypt, Libya and Nigeria (88% of the whole African region). Algeria is a major world producer and exporter of natural gas. This natural gas endowment has formed the basis for the establishment of midrex direct reduction plants in the following countries:
- Egypt - Alexandria Iron and Steel Co. Dikhela
capacity - 840,000 tons/year installed capacity (currently enhancing the capacity by additional 400,000 tons/year
- Libyan Arab Jamahiriya - Executive Board Iron and Steel Co. (EBISCO)
Misurata, capacity 1.1 million tons/year
- Nigeria - Delta Steel Co., Aladja, capacity
1.02 million tons/year
All African countries, except Algeria, Libya, Botswana, Chad and Togo, have significant exploitable hydro-resources for electricity production as well as water resources for industrial usage. Africa’s technically exploitable hydro-potential is estimated to be over 360 GW, (more than 16 percent of the world total), with the Democratic Republic of Congo river potential alone been greater than 100GW (of this, less than 5 percent has been exploited). The main electricity producers are Algeria, Egypt, Libya, Morocco, Nigeria, Zambia and Zimbabwe.
For the purpose of this presentation, Africa will be defined as all the countries south of the Sahara. The Arab countries are therefore not covered. The reason being that the Arab Iron and Steel Union is better placed to describe in greater details about the “State of the Steel Industry” in the Arab countries north of the Sahara. These countries include Morocco, Libya, Algeria, Tunisia and Egypt,
With the exception of South Africa, the steel industry in the other African countries is still in a state of slumber. At best the industry can be described as being in its infancy. Even in countries like Nigeria and Zimbabwe where something substantial has been done, what is considered substantial, is really nothing to write home about. When the state of the industry in Nigeria and Zimbabwe is compared with situations in the other African countries, then these two countries could indeed beat their chests with pride for having acquired the sophisticated technologies for steel making in their integrated steel plants.
One will therefore consider here only those countries where there are a fairly good level of activities within the steel industry, starting with South Africa.
Even though the population of blacks far outstrip those of the whites in South Africa, as a result of the apartheid policy in that country, the blacks had been restricted to colonies within the territory of South Africa, just like the red Indians have their reserves in the USA.
To all intents and purposes therefore, South Africa is really a white man’s enclave within a black African society. Even with the political changes in that country not much has really changed in reality in the lives of the black South African. We are therefore dealing with a 1st world country within a third world nation. The steel industry in South Africa therefore was developed in line with Western European concept. South Africa even out-produces some of the developed countries in Europe and the far East as far as steel production is concerned. The total output of Iscor, the leading steel producer in South Africa today is 6.2 million tonnes of crude steel, and is ranked 28th in the world, considering the output of companies.
The total annual liquid steel output of South Africa is not much more than 6.5 million tones. A few re-rolling mills melting scraps contribute the balance of some 300,000 tonnes over and above the 6.2 million tones production of ISCOR. Many other finishing mills depend on ISCOR for her billets or flat sheets for her down stream processes. South Africa exports steel to the USA and to some other African countries.
Indeed South Africa has joined the league of today’s world steel producers.
The case of the Steel Industry in Nigeria, is one in which the instability in Government over the years succeeded in rendering the Industry impotent. The only considerable activities being carried out in Nigeria are within the public sector steel plants of Ajaokuta (fully Integrated), the Delta Steel Plant (also fully integrated), the inland rolling mills at Jos, Katsina, and Oshogbo.
Ajaokuta’s first phase was designed to produce 1.3 million tones of liquid steel using the Blast Furnace/Basic Oxygen (BF) Technology. Delta Steel Company was also designed to produce one million tonne of liquid steel using the Midrex Direct Reduction technology. The three inland rolling mills have capacities of 210,000 tonnes each.
There are numerous private sector efforts in steel production or re-rolling of billets. These efforts are in mini-mills usually between 50,000 and 100,000 tonnes capacity each. The combined efforts of all these mills (well over ten of them), have never really added more 300,000 tonnes annually to the overall production capacity of the nation, due mainly to either operational inefficiency or the lack of operational working capital, or sufficient electric power.
The years between 1976, when the foundation for the first steel plant (the DSC) was laid, and 1999 was a period when the military was changing the national Governments the way you would be changing your pants. Even though some of these military regimes lasted up to 8 years in some instances, steel production was never their priority. With each change of Government, it took at least two years for the new Government to understand what the Industry was all about, before they would agree to continue with the projects. Meanwhile the foreign contractors/technology owners have moved out of the sites. It took probably another 6 months to one year of hard bargaining to bring the contractors back to the sites, with the consequent escalation in costs.
In spite of all the negative situations that bugged down the industry’s development in Nigeria, the country was able to complete and commission the Delta Steel Project in January, 1982. Insufficient releases of working capital right from commissioning date until May of 1996, never allowed the plant to produce beyond 25% of design capacity. The state of the plant right now is that the plant requires to be totally refurbished with a budget of about $80 million. Meanwhile the Government (now a democratically elected civilian regime), has handed over the DSC plant to two companies (Voest Alpine and Osaka Steel), under a partial privatization programme to refurbish and operate the plant. The intention here is that Government would sell off all the steel plants and the rolling mills to private sector operators. The DSC will be back in operation within the year, hopefully.
The Ajaokuta Steel Plant is also to be completed. With the assistance of the Russians, the original builders and owners of the Ajaokuta technology, a technical audit has been concluded, to ascertain the state of the plant today, as the plant had been abandoned for over 5 years, and there had been some considerable looting of plant components as well as the degeneration of some components. An agreement has also been signed with the Russians for the completion of the plant. It is hoped that the plant will be commissioned in no distant time, if the funding is maintained. The present civilian Government has promised to complete and commission all the nations public sector steel plants before leaving office in year 2003, and hopefully there will no longer be any more military intervention in Governance.
When the British Colonial masters were forced out of the then Northern Rhodesia (now Zimbabwe), it was not a parting of ways of friends. These colonial masters left behind a 1 million tonnes integrated steel plant in virtually a dilapidated state. Fortunately many black Zimbabwean staff of the plant took over the plant when they were not really prepared for that take over. The plant was now renamed Zisco (Zimbabwean Iron and Steel Company). Even though at reduced production capacity, the plant continued to produce.
After a while, it was clear to the new owner of Zisco, the Zimbabwean Government, that the plant needed to be refurbished. In a typical World Bank economic style, the Zimbabwean Government was advised by the World Bank to privatize the plant as is. After some two years or so waiting for buyers and finding none, the Government then decided to refurbish the plant first before divesting to the tune of 75% in a privatization exercise.
During this refurbishing exercise, a new sinter-plant was put in place. A new blast furnace was also built, with the cooperation of the Chinese. Some refurbishing was also done in the rolling mills. The newly refurbished Zisco has reached a production level of over 70% of the original 1 million tonnes capacity. The recent Western World sabotage of the economic activity (hiding behind the pretext of the land transfer from the whites to the blacks) of the country is having some impact on the sustainance of productivity in the Company.
When the political situation in that country stabilizes, it is believed that the privatization of Zisco could continue without any more hitches.
Other areas of activities in Zimbabwe include re-rolling mini-mills like the 50,000 tonnes wire-rod mill at Kwekwe, and the 7,000 tonnes seamless, tube plant (Tor-steel), and factories for steel components (spare-parts mainly) manufacturing.
Incidentally Zimbabwe is rich in good quality Iron ore, and coking coal.
OTHER COUNTRIES WITHIN THE SUB-REGION
Some of the other countries within the sub-region that are active in the steel industry are in the areas as listed below:-
(i) Ethiopia - foundry and machine shop. (64,000 tonnes)
(ii) Kenya - re-rolling mills, and machine shop, at locations like
Nairobi, Dandora, Runi, Kikuyu, Mombasa: cumulative total capacity about 300,000 tonnes.
(iii) Ghana - scrap-smelting, re-rolling and machine shop.
Total rolling capacity about 80,000 tonnes.
(iv) Mauritania - Iron Ore production and export. Also 5,000 tonnes
(v) Mozambique - Coking coal production, Iron Ore production and
(vi) Zaire - re-rolling project proposed by some private sector
entrepreneur. Capacity already in place – 100,000 tonnes) Maluku.
(vii) Angola - Raw-materials and gas yet to be fully exploited.
Re-rolling capacity 50,000 tonnes. Re-rolling facilities – 75,000 tonnes
Other countries with mainly re-rolling activities include:-
Mozambique - 80,000 tonnes
Uganda - 40,000 tonnes
U.R of Tanzania - 24,000 tonnes
Mauritius - 75,000 tonnes
Liberia - 20,000 tonnes
Madagascar - 36,000 tonnes
Togo - 32,000 tonnes
Cameroon - 40,000 tonnes
Africa is edowed with raw material which in most cases is available for export. On the other hand most of her consumption of finished and semi-finished products is imported. The market is there only that the commercial environment is not yet developed to modern status.
FACTORS MILITATING AGAINST COMMERCIAL ACTIVITIES WITHIN THE SUB-REGION:
Several years a go, a South American student studying in a London University was asked the question “what is the most popular sport in Latin America?” The student answered back “military Coup”. The questioner then said “I thought your most popular sport is Bull Fighting”. The student responded that “Bull Fighting was the second sport”.
Sub-Saharan Africa has really taken over from the Latin America on the matter of Political instability. Talk about Sierra Leone which is only just wriggling out of a 12 year period of civil war. Guinea has had more than her fair share of crises. Burkina Fasso, Cote d’Ivoire, Ghana, Togo, Nigeria, Zimbabwe, Benin, Tchad, Niger and the Camerouns are all not yet stable for meaningful development. When it is not political wars, it is ethnic or religious. Look at the Congos, Angola, Rwanda, Zambia, Burundi, Sudan and Malawi what you see in them is one crisis or the other.
The politicians’ preoccupation is planning of survival strategies and not planning how their respective economies could be improved through industrialisation and commerce. Where some semblance of stability appears, the politicians are keeping themselves busy with looting the economy. They prioritise their pockets rather than their nations. Some countries may be indebted to the Paris Club or London Club to the tune of 30 billion US dollars and are unable to pay back and asking for debt relief or debt forgiveness while two or three national individuals have stashed away, in European or American banks, the equivalent of 60 billion US dollars.
These Western countries have encouraged the looting and stashing away over the years. The sub-Region remains poverty stricken while their looted funds are being used to constantly improve upon the economy of the Western World.
Most of the debts of the developing nations are monies spent on procuring sophisticated armaments for slaughtering ourselves. Not just this, the West are not interested in helping the developing nations to industrialise. The only industry they are interested in is in mining our minerals like crude oil, gold, diamond etc. No matter how hot the fighting going on in these developing countries (ie no matter how unstable and unsafe), the Western operatives will be there digging it or pumping it out. Hence the saying that you may be shooting them on the back, but they will be busy bending down carting away the minerals, they do not consider instability or insecurity as a factor here. The West is desperate for the minerals while our leaders are desperate for the money.
LOGISTICAL AND INFRASTRUCTURAL PROBLEMS
A few years a go, a Steel plant in Nigeria, the Delta Steel Company (a Midrex Direct Reduction technology), ordered for graphite electrodes from some company in South Africa. The electrodes could not be sent to any port in Nigeria because there was no shipping link between South Africa and Nigeria. The ship carrying the electrodes which was on her way to Europe dropped them at the port in Abidjan. It took another two months before another shipping company called BACO LINERS was able to move these electrodes to Nigeria. In the interim however, all production activities at the plant had stopped due to lack of electrodes. It is left for you to imagine the financial loss. The same story could be told about shipping activities between the sub-Region and the Middle
Eastern Countries. For commercial activities to thrive effectively, there must be good shipping linkage, especially where we are considering such heavy materials as steel raw materials or products. The market is there but you have to get to the market to be able to sell.
There are several modern communication tools that could enhance commercial activities within the two Regions. The level of computer awareness and access to the internet is very low. Telephones are super luxury within the sub Region, let alone the now mobile cellular phones.
The area of communication is one other area that require a lot more attention to be able to participate in the now available e-commerce.
The area of Electrical power supply is one of great concern within the sub Region. The whole area is greatly under supplied. Without adequate and reliable power supply, industries suffer and good communication becomes a mirage.
The state of inland transportation, be it rail ways, roads, water, is nothing to write home about. The highways and even the rail tracks are in such a state of dis-repair due to very poor maintenance culture and sheer lack of the political will to keep these facilities in such a usable state at all times.
To improve upon inland river transportation, Nigeria for example, has been talking about dredging and taming River Niger for over 30 years, and yet nothing has come of the political will apart from political slogan.
International commercial activities will definitely be improved upon with good inland transportation, especially in a huge country like Nigeria with a population of about 130 million.
THE WORLD BANK AND THE DEVELOPING NATIONS
The World Bank has arrogated to herself as being the economic policeman to developing nations and/or the emerging economies of the former Eastern block.
Some few years a go the Russian Federation told the World Bank to go hang, when the World Bank was prying into every facet of the Russian economy. She was reminded that Russia was a Sovereign state and was not prepared to have her economy managed for her, by some foreigners housed in one Concrete mass in Washington DC.
We have many more economic experts in this sub-Region than the World Bank could afford to have. We the citizens of this Region understand the sub-Region better than the World Bank ever will. Analysing a country’s economy through comparisons based on incomplete data in respect of that nation’s economy, is dishonest to say the least. A good example is to talk about the cost of say fuels and lubricants without reference to the per capita income in a country, or by pretending that such a data was not important. This approach is totally unacceptable and dishonest to say the least.
Yes indeed the World Bank being some kind of international economic think tank, could advise on which direction a country should be moving in, based on the experiences of the countries. It is however the business of the country in question to decide on what precisely she should be doing. The Western world should stop intimidating any country that does not find the advise of the World bank acceptable.
In 1977 the World Bank advised Saudi Arabian Government to build only iron making facilities as there was no reason for building steel making facility. This advise, the Saudi Government disregarded. Today Saudi Arabia produce about 4 million tonnes of steel and consume almost all of it locally due to the construction activities going on in the country.
All advise or programs proposed by the world bank, should be thoroughly subjected to serious analysis by local experts, before final decisions are taken. We should begin to believe in our own experts. It is true that “a prophet is without honour amongst his own people”, the writer believes that the time has come for our policy and decision makers to change this negative attitude towards her own people.
Dr Sanusi Alhaji Mohammed (FNMS)
AFRICAN IRON AND STEEL ASSOCIATION