Pula Steel says it will soon conclude supply agreements with potential buyers of its steel products, as the company moves to dispel concerns that it might end up catching the Botswana disease and collapsing before takeoff. The company is looking to export to countries like India, United Arab Emirates (UAE) and Dubai.
Pula Steel Managing Director, Ranvir Verma told journalists on a guided tour of the plant that they already have letters of intent from some of their targeted markets.
“One customer has already visited the site from Dubai,” he said.
He added that Pula Steel has targeted five to 10 customers for its steel products. The flagship project is aimed at boosting economic activity in the Selebi Phikwe region and ensuring sustenance even after closure of the BCL mine. The mine, which employs around 4,500 people, is the only enterprise that is keeping Selibe Phikwe alive at the moment. The idea is to push big projects similar to Pula Steel towards the Selibe Phikwe area as compensation for other “failed” mega projects like Botswana International University of Science and Technology (BIUST), which was initially targeted for Selibe Phikwe and later relocated to Palapye.
For his part, Pula Steel’s Director of Corporate Affairs Brian Mosenene said the company has secured long term off-take markets with international customers for billet and with local customers for rebar.
“Supply agreements are being finalized,” he said.
There were fears that the Pula Steel project could end up going the way of the Fengyue glass project in Palapye, which failed to take-off after gobbling millions in government investments, amid allegations that the project had failed to secure off-take agreements with potential buyers. Doubts over the viability of Pula Steel were elevated after neighboring South Africa announced that it had joined forces with a Chinese company to build a steel plant worth over P2 billion not far from Selebi Phikwe, just a few months after Pula Steel kicked off.
The Pula Steel project was set up as an integrated factory that manufactures steel from scrap metal. It will only buy scrap metal from licensed dealers to avoid theft. The company said it has secured commitments for the supply of scrap metal from mining operations, including BCL. Last week Verma announced that they have enough material to satisfy production targets over the next couple of months. The target is to start production by September.
So far, cutting and processing of scrap has already commenced at the BCL scrap site; and the first billet is expected out of the production line by 31st July 2015. Full billet production is expected by 30th August while the first rebar out of production is expected six months later. BCL Managing Director, Dan Mahupela revealed that the Pula Steel plant was supposed to have been built in two phases, with Phase I producing 80 tonnes of billet per day. However, the plant was later modified to accommodate a higher output of 240 tonnes per day.
“The combination of the two phases meant that the project was moved forward from a targeted production date of December 2014 to August 2015. The significant positive outcome in bringing Phase II forward is the instantaneous increase in employment opportunities, rather than having the benefit deferred to some future date,” said Mahupela.
He further revealed that the project was meant to employ 250 workers in the primary phase, but the number has doubled as a result of the fast tracking.
“This also means that such production levels, upon commissioning of the plant, will ensure greater shareholder value in terms of projected returns on investment,” said Mahupela.
The project is expected to create 1000 jobs at full production. BCL, which is owned by the Botswana government, has a 50.5 percent stake in Pula Steel. Already, the mining company has invested P53 million into the project to support construction.