Otavi Steel production plant set to boost ailing construction industry – consultant
Projected to generate a revenue stream of N$2.8 billion in the first year of operation, the Otavi Steel Manufacturing Plant will drive growth in the local steel industry and subsequently, boost the struggling construction sector, according to Adriaan Grobler, Director of Lithon Project Consultants.
Speaking to the Economist, Grobler said the annual revenue stream estimated for the Otavi-based plant will increase to N$6.1 billion after the first 10 years.
“The project will be a catalyst for the steel industry in Namibia. It will smelt scrap and produce rebar and other steel sections (around 300,000 tonnes per year) for the construction industry, thereby stimulating both the scrap industry as well as providing steel on a cost competitive basis to the construction sector,” Grobler said.
Grobler added that the construction cost will be N$2.75 billion and more than half of the work will be done by local contractors.
Speaking on the sustainability of the project which started in 2012, he said the project has tenacity as the first bankable feasibility study was completed end of 2015 after which Otavi Rebar Manufacturing (Pty) Ltd started to look for an investor and technical partner.
“A comprehensive market study was done confirming the feasibility of the project. It further has an excellent expected rate of return with a positive net present value,” Grobler added.
Lithon Project Consultants will serve as consultants of the project while NORIC Otavi Steel Processing (NORIC Otavi) will be the EPC (Engineer, Procure and Construct) contractor as well as the plant operator and take full responsibility for the planning, design, provision of technology, construction and operation of the plant.
The two shareholders of NORIC Otavi, of which Grobler is also a Director, are the local company, Otavi Rebar Manufacturing and the Swiss-based company, NORIC Swiss GmbH (NORIC).
According to Grobler, negotiations with NORIC Swiss GmbH started in November 2017 and a Memorandum of Understanding was signed in January 2018 after they visited Namibia and evaluated the project. The shareholders agreement was signed in May 2018.
On 14 November, Nedbank Namibia Corporate and Investment Banking (CIB) and NORIC Otavi Steel Processing signed an agreement which will see Nedbank act as the lead arranger for the project.
According to the agreement, Nedbank will assist with the financial structuring of the project and facilitate the raising of both quasi-equity and debt capital for the project.
“It is worth noting that the fruits of this project reach far beyond the just over 4000 inhabitants of the northern Namibian town. The development of a steel manufacturing plant will not only serve to benefit the town of Otavi, its benefits are wide reaching and flow across our borders into neighbouring countries such as Angola, Zambia, Zimbabwe and Botswana,” Nedbank Namibia Executive for CIB and Treasury, Karl- Stefan Altmann said.
The socio-economic impact of the project on Otavi will be significant according to Otavi’s Mayor, Martha Shipanga as it will create 350 permanent jobs. The Otavi Town Council has already made provision for additional industrial plots for supporting industries, as well as 1,500 new residential and other plots next to the new industrial area. The council has also provided 77 ha of land, through a Public Private Partnership for the project and is also a shareholder in the project.
Caption: Otavi Steel Manufacturing Plant’s production is currently underway. (Photograph by Lithon Project Consultants).