The future of Nitrogen Chemicals of Zambia

It is easy to forget that Zambia actually has a fertiliser manufacturing plant in Kafue. However, this plant has been a drain on public resources for some time now because it simply can not produce fertiliser at an economic price. The situation has been made difficult by the fact that it is cheaper to import fertiliser than manufacture it locally. While I appreciate that NCZ is a significant employer in Kafue, the rest of the taxpayers can not continue subsidising jobs in Kafue. If the plant can not operate on a commercial basis, GRZ needs to either close it down immediately or find a private company to run it. I would rather the resources were spent improving schools and hospitals in Kafue than propping up a few hundred jobs which is not sustainable in the long run.

The latest edition of Executive Issues has a very good analysis of the situation.

Before the 2009 budget was unveiled Government had talked of an allocation to revamp operations at the stricken Nitrogen Chemicals of Zambia (NCZ) in Kafue, the country’s only fertilizer manufacturer. But in the event no such specific provision was made and perhaps rightly so as there are grounds for skepticism whether in fact by such means-periodic and normally insufficient allocations- the operation can be resuscitated and sustained. This approach appears designed to merely “keep the peace” for a while among the restive and increasingly assertive workers. But a more far-reaching decision on the fate of the plant is now required. Temporal political appeasement will no longer do. Up to this point, decisions on the plant have been mainly worker-driven. Workers there tend to take the view and probably rightly so that the authorities are somehow “negligent.” They have taken to the street in past to force action. They are a constituency and politicians are not in the happy position of being able to blissfully ignore them.

In the aftermath of the state opening of parliament on January 16, 2009 for instance, there was a demonstration outside the offices of the Kafue District Commissioner by NCZ employees. The source of their discomfiture was the fact that there had been no mention of recapitalization of the plant by Government in the President’s opening speech. This created and increased anxieties among workers about their future. It was not the first demonstration by NCZ workers over the future of the plant that has been shut quite a while now.

An earlier demo was staged in such a way that it blocked the main road from the south to Lusaka disrupting the normally heavy flow of traffic from the south and during the copper price boom traffic was very heavy since road transport was the main conduit for mining equipment, spares and for mineral exports in view of the buggered railway system! Following the last demo, Agriculture Minister Dr. Brian Chituwo counseled calm and disclosed that an inter-ministerial committee was still studying the matter and the workers would be informed of the outcome.

Further, when he accepted the credentials of Oh Jae-Hack as the ambassador of South Korea to Zambia, President Banda invited South Korea to invest in NCZ and help boost Zambia’s agriculture. He said South Korea had the appropriate technology for NCZ to produce cheaper fertilizer. No direct response from the envoy is on record.

Subsequently, Vice-President George Kunda speaking in the National Assembly said in answer to a question from Chikankata MP Munji Habeenzu that Government would allocate resources in the 2009 Budget to revamp operations at NCZ and that government was aware of the problems there. That is probably what the workers wanted to hear- news of a possible respite from the perennial tight rope they have found themselves walking. It is also the case that with the rising world price of fertilizer and the push to prioritize agriculture, government has an abiding interest in reviving NCZ and it does hold the key to the future of the plant.

Finance and National Planning Minister Dr. Situmbeko Musokotwane was more forthright and realistic when he spoke on the issue saying that Government was not in a position to run NCZ, would prefer the private sector to takeover and invited any interested parties to open up discussions with government on the matter. He also said something that is not often said but which appears to be the real issue at NCZ -that the installed technology at the plant may be outdated. That is the issue that the inter-ministerial committee must face head as it seems the key to the logjam.

In the short-term, there is probably no alternative to government remaining engaged but they need a strategic partner with whom to re-look the whole operation and finance a re-orientation of the whole plant in terms of technology and possibly the product range as well. NCZ in its heyday seemed to do a rolling business with the Democratic Republic of the Congo in by-products that go into the manufacture of explosives and it is a business that still exists and could grow. NCZ is well positioned to supplement earnings through it. In its present state however, there appears to be no takers for NCZ and certainly not on an “as is” basis. Sitting back to wait for expressions of interest will only ensure its permanent closure. Government needs to be pro-active and try for instance to pursue the South Koreans who have modern technology. The plant simply has to be upgraded and put on a new footing.

Periodic allocations merely to douse labour unrest will be inappropriate and there can be assurance that it will achieve the desired results. Time is for a long term plan to salvage the plant before it goes real rusty and is forgotten.

Already things are beginning to point in that direction.

The PANEL