Nigeria: Troubled Delta Steel . . . Any End to the Controversy?

Lagos — Recently the Senate Committee on Privatisation went on another fact-finding mission to Delta Steel Company, bought by the Global Infrastructure of Nigeria Limited.

But it appears such visits have provided more convincing reasons why the Indian firm should be allowed to resuscitate and run the moribund steel rolling mill. Agha Ibiam writes.

In less than three months, the National Assembly has paid various visits to the Delta Steel Company (DSC), Ovwian-Aladja, Delta State. Last week, it was the turn of the upper chamber. The multiplicity of the visits was to ascertain if the company that was sold to Global Steel Infrastructure of Indian is really producing.

Recently, the Alhaji Njidda Ahmed Gella led committee on commercialisation and privatisation in the House of Representatives, had recommended that the sale of the steel company be reversed and probably be sold to BUA International Limited. This however has generated a lot of ripples and criticism in different quarters.

The House claimed that the decision was at saving Nigeria’s ailing steel industry and therefore, recommended the immediate reversal of the sale of the steel company. The House equally hinged its decision by saying that the sale of the plant did not go through due process and the failure of the Global Steel to make appreciable improvements in terms of physical investments.

However, close sources said that the recommendation by the committee leader is not the decision of the house. The assertion no doubt prompted the Senate Committee on privatisation to pay another facility tour to the factory within a couple of weeks that pronouncement was made. The one-day visit was to ascertain if truly as claimed by the company that production work is going on in the factories.

The senators, led by Mr. Ayo Arise, Chairman Committee on Privatisation, unmistakably stated that he was optimistic that Delta Steel is producing. He said what his committee saw in DSC, was in contrast to what they saw at Ajaokuta. The visit was not a tea party as the committee first port of call was at Ajaokuta, before flying down to Warri. Normal of the legislative arm of government, the opportunity was used to drill the management of the organisation on matters that bother on workers pension, welfare and the production flow of the steel company.

Mr. Arise, said, “in terms of activities in the company, at least I will say that we have solace on the fact that there is production going on here. The factory is working and repairs are still going on in some aspects of the factory. Right now we have seen they are able to use their furnace to produce liquid steel and they are using the scraps to melt iron and also billets are produced.

“I understand too that when they have excess, they supply to Ajaokuta steel. But right now they are not even producing enough to use. Well, what we saw is a sharp contrast to what is going on in Ajaokuta. Also we have been able to see that the Warri River via the Atlantic that when dredged will provide some accessibility so that the raw materials can come in,” he stressed.

But in terms of the problems they met on ground, vis-a-vis the staff pension and the agitation of the union, Arise promised the workers who wore their clothes turned inside out as a sign of demonstration that the matter is being addressed by the National Assembly to see how best to solve the situation.

“The Appropriation Committee will address their demands in the current budget and I hope that by the time the budget is passed, there would be smiles on the faces of the pensioners as well as others who are suffering from lack of the payment of the pension,” he said.

The law makers gave the impression that the Delta Steel, sold at the cost of $30 million in 2005 by the Bureau for Public Enterprise (BPE), has gone beyond sales reversal. If the truth must be told, the House Committee on Privatisation and Commercialisation during the fact-finding mission saw a lot that could have convinced them that Global Steel has the technical competence and financial muscle to run the mill.

From what Dr. Sam Nwabuokei, an engineer and Joint Managing Director of Delta Steel said, is a clear indication that the Indian firm has all it takes to turn-around the place He said both the Chinese were invited to take over DSC in 2000 they couldn’t. Likewise the Austrians and the British companies could not withstand the enormity of work that was required to give the place a face-lift.

“So the reversal of the sale is better imagined. You can see what the trend is in the prices of steel. It has gone from N70, 000 per metric tones to a present price of N421,000 per metric tones. We don’t know where it will end us.

“It is inconceivable at this point in time to fathom a reason for a reversal of the process. Whatever the House has decided within their purview, is not debatable. The sale of DSC to GINL has to do with different phenomenon distinct from the bidding process which culminated in no sale by BPE to BUA,” the MD said.

But the Senate might slightly take a different stand from its counterpart in the lower House. Arise, who has a corporate business background said he has read the Commercialisation and Privatisation Act, stressed that all the agencies that participated in the sales of the steel has not derailed in its function. He hinged his argument based on the fact that the sale of the steel must have been anchored on what he called the ‘willing buyer, wining seller situation.’ This, he said will be looked into and see if it could be amended in the 1999 Act, so that the clause will no longer be there.

“That is the clause that allows the person to say he can pay the money offered for the sale of a property, or the seller saying that he does not like the price offered by the buyer, therefore I will negotiate with someone that will pay me more. So that is the willing buyer, wining seller clause that the Presidency and the BPE probably must have used to negotiate with Global Steel and sold the factory to them at about $30 million as against the $20 million or so BUA offered.

“If we don’t take a position, then it will be like going back after Global Steel has been able to get the factory working for about 10 years. The factory today is no longer worth $30 million; it’s worth several amount of money in excess of that. But we will look at the two sides, if anything has been done wrongly, outside the law, we will say it. But so far, we are searching and watching. But the law covers the actions of BPE on this transaction,” Arise explained.

Other Senate members who were in attendance, but made useful contributions to ensure that the steel industry is returned to its original glory are Senators Kola Bajomo, Femi Kila and Smart Adeyemi. BPE Director, Mines and Steel Development, Mrs. Modupe Abiodun-Wright was on the trip, but declined to make any comment on any of the issues.

The citing of the industry was made possible due to the availability of natural gas which could be found in abundance Aladja. The plant was commissioned on January 29, 1982. But due to paucity of funds, the company came to an abrupt collapse in July 1996, when materials used for production could no longer be sourced and there was no budgetary allocation to keep the staff and machines running.

The consequences of that was the rot that set in. For 10 years machines were down as there was no production. At the same time, staff salaries started to accumulate. Simple things almost became impossible. That continued until 2005 when some of the staff were disengaged and their gratuity paid.

The beauty of the plant is that it has three strategic advantages. One, is it nearness to natural gas fields; a navigable sea channel and large scale electricity power generating stations. The original plan of Delta Steel Plant was designed to produce 960,000 tones of billets at full capacity, two third the organisation, said are for the consumption of the government-owned inland rolling companies at Jos, Osogbo and Katsina. The balance of the billets is rolled in-plant to light sections and reinforcing bars.

The visit of the Senators is a welcome development Nwabuokei said, which has afforded them the opportunity to see the plant produce liquid steel. Two furnaces were on, and the Senators saw that Global Steel can produce liquid steel, and this they have been doing since 2006. He said those who had ideas that Global steel is not producing liquid steel might be wrong. This august visit by Senators, he said has confirmed that “we are capable of producing. But most importantly, the steel plant is available, at least at 88 per cent.

“The steel plant is ready to produce to that capacity too. Most of the plants are available. But suffice it to say that the ‘heart of the plant’ which is the steel melting shop has two furnaces working and very soon we will have the third and then the fourth furnace working. Thereafter we have two continuous casting facilities working.

“We should be ramping up our production to 1.02 millions tones of liquid steel. That should meet the demand by Nigeria for liquid steel which at present is slated at 1.2 million tones of liquid steel per annum. Other smaller plants should be able to produce the 200,000 tones of liquid steel required by the government. Flat steel will still remain a problem for a while until Ajaokuta gets into the phase of producing flat steel,” he said.

DSC has been rehabilitated with a lot of funds. All the primary plant units, billets, direct production plant, steel melting and rolling meal have all been rehabilitated. In addition, the auxiliary facilities like the oxygen plant, water treatment facility, workshop and all other units like the harbour, the lime plant and all other units that are essential for the operation of DSC have also been rehabilitated.

Nwabuokei who rather opted out from going into the realm of evaluation and speculation on what the company worth now, said a reasonable amount of money has been injected in the rehabilitation of the factory. The amount talked about should be above $200 million, he said.

Capital investment that are going on are also in hundreds of million of dollars. A lot of funds are really needed for full turn around of DSC. So what the company has so far done is to complete primary rehabilitation work in other to get to 2.4 million tones of liquid steel, while more funds is needed to be pumped into the system to actualise the production of flat steel product.

However, the dredging of Warri River and the construction of the rail road seem to be another challenge facing the resuscitating of Ajaokuta steel. Nwabuokei said nobody can run Ajaokuta that has been lying in waste for more than 30 years until those things are put in place. The Federal Government, he said has been told those things over the years and there is no other substitute.

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