HARARE – The European Union (EU) will next year grant Zimbabwe $4,1 million to finance a feasibility study targeted at facilitating revival of its iron and steel industry.
The country’s steel industry has been dealt a serious blow following the closure of 17 companies last year while the deteriorating economic climate is further straining the situation.
Paulina Rózycka, EU’s head of section economic cooperation and food security in Zimbabwe, said the Western trade bloc is planning to carry out a diagnostic study on the status of the engineering, iron and steel sector and to develop a strategic plan for the revival of the engineering and steel sector.
“These actions will be carried out in a framework of the three million Euro ($4,1 million) support programme to trade and private sector development to commence early next year,” she said, adding the funding was not a loan.
Failure to revive Ziscosteel — now NewZim Steel following the acquisition of a 54 percent stake by Essar Africa Holdings — and to promote new investment in the industry has also been blamed for the demise of the sector industry, contributing to Zimbabwe’s estimated 80 percent unemployment rate.
The investment climate, meanwhile, continues to be dampened by the indigenisation drive.
Zimbabwe’s indigenisation policy compels foreign-owned companies to cede 51 percent shareholding to black locals.
Relations between the country and EU — which soured in 2002 when the bloc imposed trade restrictions due to alleged human rights abuses — have been improving since the formation of a coalition in 2009.
Rózycka noted that trade between Zimbabwe and the EU has over the years been growing significantly, despite the perception that the country is isolated by Western nations through sanctions, as is often cited by Zanu PF when explaining the country’s enduring economic morass.
“As regards trade in 2012, total trade between the EU 28 and Zimbabwe (total exports and imports) amounted to around $791 million with a positive trade balance of around $171,5 million in favour of Zimbabwe,” she said.
In the period under review Zimbabwe exported to the EU approximately $482 million (€ 370.85 million) and imported from the EU goods for a total value of around $ 309.37 million (€237.97 million).
Rózycka said Zimbabwe must make full use of the opportunities arising from the economic partnership agreement (EPA) signed between the EU and ESA countries/Zimbabwe that grants duty free quota free access to Zimbabwean exports to the EU.
“The provisional application of the agreement has very positive implications for the private sector and industry in Zimbabwe in general and in particular, it provides a wide range of opportunities for accessing new markets in the 28 member states of the EU thanks to the duty free quota free access (DFQF) of all goods to the European Union,” she said.
“The Economic Partnership Agreement will stimulate the diversification of value added exports to the region and to the European Union.”
Industry experts noted that the free quota granted by the EU to Zimbabwean exports will help to boost the healthy trade relations between Zimbabwe and the bloc.
“Improved business environment, predictability, and clarity on the economic policies that the Zimbabwe will implement, would also help to grow investment and trade relations between Zimbabwe and the EU,” noted Rózycka.