NCZ…The sleeping giant

By Nawa Mutumweno – To many a critic, Nitrogen Chemicals of Zambia Limited (NCZ) is a corporate has-been that should be disposed into the dust bin of history.

To many economic analysts, sympathizers and the public at large, NCZ is a viable entity  if only a dosage of investment of the right proportion is administered.

Perhaps there is no other company in Zambia whose operations crosscut various facets of economic activity. NCZ has a bearing on the mining, agriculture and industrial sectors of the economy..

Established in 1970, with Japanese assistance (Kobe Steel), to supply ammonium nitrate explosive grade to the mines through Kafironda, its operations were enhanced in 1982 with the addition of a fertilizer (NPK compounds)  manufacturing plant under the auspices of Germany’s Klockner-ina.

Its contribution to the well being of the country’s economy over the years cannot be doubted.  However, lack of funding, under capitalization, an ageing plant and equipment  and a failed privatization programme has taken its toll on the sleeping giant which has the potential to wake up from operational slumber.

If adequately funded and fully rehabilitated, NCZ would be one of the most profitable industrial concerns. Its market linkages are as follows:- fertilizers  (agricultural), liquid carbon dioxide (soft drinks), liquid nitrogen (artificial insemination in cattle), methanol (hotel industry), ammonia solution (manufacturing), anhydrous ammonia (refrigeration), ammonium nitrate dense and porous explosive grades (construction and mining), nitric acid (mining and manufacturing) and sulphuric acid (mining and manufacturing).

The company also has various workshops that include fabrication, machining, civil, mechanical and auto works. Its laboratory has the capacity to analyse alloys, water, fertilizers, among other materials.  It also has useful by-products such as demineralised water and battery acid.

A ray of hope for the company is in the offing following the signing of a K1 trillion decade-long ammonium nitrate offtake deal  with African Explosives Limited (AEL). According  to the deal, NCZ is to supply 60 000 tonnes of ammonium nitrate explosive grade to AEL. Thus, NCZ is scheduled to increase its revenue base and improve its operations as AEL  will fund the deal to a tune of K110 bn annually.

The transaction was signed late last year between NCZ chief executive officer Jordan Soko and  AEL managing director Thinos Bierman.

NCZ was until recent times, the second largest investment after the mines with five areas of production namely:- Area One (Utilities), Area Two (Ammonia Plant), Area Three (Nitric Acid and Ammonium Nitrate Plants), Area Four (NPK Compound Fertlizer Plant and Ammonium Sulphate Plant) and Area Five (Sulphuric Acid Plant), a mammoth investment indeed.

In terms of fertilizer production, NCZ’s design capacity is 144 000 tonnes of NPKs (basal dressing) and 60 000 tonnes of ammonium nitrate per annum (top dressing), amounts that can meet Zambia’s requirements.  If all the requirements were produced locally, the product would be cheaper. Another way of reducing the price is to mine phosphates (a major ingredient in fertilizer production) which are available in some parts of the country. Currently, phosphates  are imported.

A Fertilizer Restructuring Project was undertaken between 1986 and 1991 to raise NCZ’s production efficiency so that Zambia could reduce its reliance on imports and save the much needed foreign exchange. The project played a part in the country’s industrial strategy, whose goals included paying more attention to the links between industry and agriculture and to the performance of large-scale capital-intensive public investments.

The project had two components:- the policy and institutional component , financed by IDA, provided for increasing output prices, overhauling management, upgrading staff skills, and restructuring company finances; the physical support component covered the technical rehabilitation of the first production line (NCZ I), a coal-based ammonium nitrate plant financed by Japan’s Overseas Economic Cooperation Fund (OECF); the second production line (NCZ II), also a coal-based plant producing ammonium nitrate and compound fertilizers, financed by the German Kreditanstalt fur Wiederaufbau (KfW, and offsite infrastructure and environmental facilities, financed by NCZ itself.  This was at a total project cost of $69 million.

Both the two production lines needed full technical restructuring. Successful  restructuring hinged on all the components within each plant being completed properly and on time. Poor work or delay had a negative impact on the entire restructuring of the factory. The project got off to a shaky start from which it never fully recovered. While NCZ I rehabilitation was successfully carried out, the NCZ II and off-site development did not, suffering long delays and substantial cost overruns.

Today, NCZ is neither fully rehabilitated nor operating efficiently; it has not increased production considerably and capacity utilization is still very low. It goes without saying that its operations are not sustainable without further rehabilitation.

Government should engage the owners of the technology to take an active financing role in the company if its long-term productivity and profitability are to be assured. Secondly, the company should be commercialized or an equity partner introduced to stir the company to success.

Such complex projects will not succeed without an adequate enabling environment, especially price and competition policy incentives. Rehabilitating this important ‘piece’ in the country’s industrial framework is key to enabling it take   its rightful role in the economy.

The author is former Public Relations Officer for NCZ