Hayman has Bowie saying it was a demo for a piece to be used in the musical that he was planning at the time (which became his next album, Diamond Dogs).
One piece of evidence that the piece may have been recorded (or at least undergone overdubbing) during the July 1973 Pin Ups sessions at the Château d'Hérouville is an interview by journalist Martin Hayman at the end of the July sessions, which noted that Bowie played the "Zion" recording for Hayman as a work in progress.