Resurrecting Maluku steel plant in the DRC – is it possible?
A US-based businessman has a dream to reboot a steel mill in the chaotic and investor-averse environment of the Democratic Republic of Congo. Against all the odds, can he succeed?
Sat idle in the Democratic Republic of Congo (DRC), beside the Congo river in Maluku, a municipality of the capital Kinshasa, is the Maluku Steel Plant - 375,000 square foot of steel making potential.
The 45 year-old plant is a symbol of wasted opportunity seen all too often in resource rich African states, such as the DRC. Valuable raw natural resources are routinely shipped out of country, along with a huge chunk of their economic value, for processing only to be imported back in the form of manufactured products.
"For a country [DRC] trying to break out and grow it had its own steel mill, yet here I was selling their scrap metal to Belgium and China," explains Jack Morrison, a Hawaii-based entrepreneur and businessman who is president of company Global ITCM Steel, LL. Morrison is currently seeking investment to get the Maluku Steel Plant processing again.
"[The scrap steel] was being used to manufacture rebar that the DRC was going to China to buy," he continues.
Morrison, who says his specialities are 'turning companies around and manufacturing', came across the mill in 2005 when it was in the hands of The Iron and Steel Corporation Exploitation (Sosider) - a company wholly owned by the Congolese government. Morrison was working on a separate project in the DRC.
After several meetings with government the exportation of scrap metal from the country was stopped and Morrison was granted a 20 year concession for the mill by COPIREP, an organisation appointed by the Minister of Portfolio, and funded by the World Bank, to find investors to start up stalled businesses in the DRC.
Morrison's long-term plan for the site is to utilise the DRC's abundance of high-grade iron ore to manufacture steel rails, steel plates and steel for commercial bridges. At the current price of iron ore, which has plummeted due to an oversupply in the market, it is not economic to export, he says.
The DRC has emerged from brutal conflict to become one of the world's largest producers.
The plant will begin, however, processing scrap metal and manufacturing rebar, which the mill is already set up to do.
Morrison, who sees his role as 'pushing the project to completion' but will hire 'the right people' to run it, says he has already spent $2 million and needs a further $10 million to hire people, install updated equipment and purchase the raw material to start the factory. Then Morrison anticipates the factory can be up and running within six months. He believes the project will turn a 'serious profit' in the second year of operation.
"You don't have to design it or build it or reinvent it - it is already done, you just have to bring in the technology and the people to train the locals and it is up and running," he says.
All going well, after the initial investment of $10m for the scrap operation Morrison is after a further $50m to set-up the mining operation and to build a plant to process the ore so it can be feed into the mill.
There is not enough scrap in the country to sustain the original mill indefinitely but at "nine billion tons of iron ore - proven reserves - to tap into that is the way to go to build a country," Morrison says.
Morrison expects to hire around 1,500 people when the mill is up and running. There are already 200 people trained to use the mill. These jobs, Morrison says, will create further employment in auxiliary services and benefit many more people in the local community.
The mill was originally built in the 1970s when Morrison says it received $200m of investment from the Congolese government and its partners. However the mill hasn't been in operation since 2009.
It's perhaps not surprising that Morrison has had little investment interest in funding the project. Mining in the DRC is deemed high risk by investors due to corruption, potential political instability, poor infrastructure and electricity supply, to name a just a few potential risk factors.
Investors instead could put their money in a steel plant in Norway or Peru, a mid-ranking developing country, points out Tom Burgis, a correspondent covering Africa for the Financial Times, who has just written a book 'The Looting Machine' about corruption and the resource industries in Africa.
"A lot of the poor African countries do not attract capital, or certainly not for anything other than simple extraction of raw resources, partly because the infrastructure is not there, and why is that? Because what is the political incentive of a ruling group that generally uses its stint in power to enrich itself?" Burgis says.
"You can sign over an oil prospect with a fax that immediately translates into enormous amounts of money, you can't do that with a steel plant; that takes effort, formally employing people and having all the infrastructure you need to have manufacturing."
Morrison already lost several investors interested in the project because the government took two years to hand over the keys after a contract was thrashed out. However, Morrison now has the keys in his possession, he insists. He also assures that the government is fully behind the project.
"The government, overall, wants this to happen. There were people in the government that didn't and that is what caused the delay but those people are not in power anymore."
"The Congolese government wants - no needs - to have this plant functional if they want to grow and attract other investors."
For every meeting with the government Morrison says he was accompanied by a representative from the US Embassy's ECON division to counteract corruption.
Resource nationalism means more than states simply demanding project ownership and levying heavy taxes.
In regards to electricity concerns, Morrison says the plant has a three hundred mile direct line to the INGA hydro plant.
"Kinshasa [the capital of the DRC], by the year 2025 is going to be the largest city in all of Africa. It will surpass Cairo. The reason is obvious: they have got, for a poor country, $25 trillion of in-ground assets," Morrison adds.
"People are mining, people are going to bring manufacturing back because labour is cheap. There is so much that country has to offer."
A symbol of change
The mill remains a symbol of opportunity. As well as creating jobs Morrison also has plans to develop a corporate social responsibility programme that will help fund facilities at two local schools and a hospital.
It's clear the Maluku steel plant is a passion project for Morrison -
"This has been a cause I have fought long to see come to light," he says - and it still surprises him he hasn't seen more interest in it.
"With Africa being such a hot spot and no country having more raw materials than the DRC, and steel being the core for building a nation....any nation. It still amazes me that I am practically alone."
Morrison has the best part of 20 years left on the concession to get investors to see the potential in Maluku that he does and if any one has the determination to do it, it certainly seems to be him.