THE resuscitation of the Redcliff-based Zimbabwe Iron and Steel Corporation, (ZISCO-Steel) renamed New ZimSteel, remains unclear as the agreement between Government and India’s ESSAR Group is shrouded with ‘problems’.
Government agreed to the deal, meant to result in the rebirth of the defunct Redcliff-based steel maker four years ago, but its take-off remains doubtful as no major developments have taken place at the plant to date.
The deal, estimated to be worth US$750 million at the time, saw ESSAR taking up 54 percent of shareholding in ZISCO-Steel, with Government owning 36 percent and private investors taking the remainder.
ZISCO-Steel is home to iron ore reserves worth more than US$30 billion.
Last week, the country woke up to the news that ESSAR had pulled out of the deal.
In the Financial Gazette in an article headlined ‘Essar pulls out of Zim…Zisco risks collapse’, the Minister of Industry and Commerce, Mike Bimha was quoted as saying the Indian firm had finally ditched Zimbabwe after endless battles to resolve ZISCO’s indebtedness and other issues.
“So the investor had to take a break and said when you are ready, we will come back,” said Bimha while addressing a Zimbabwe National Chamber of Commerce (ZNCC) conference.
“There are few investors who will come back after taking a break.
“When they do come back, things would have changed.
“The prices of steel are not static.”
Bimha said it was therefore impossible for him to say when operations would resume at ZISCO.
“This is the question which I always want to avoid because when I go to Parliament every Wednesday, I always face the same question on New ZimSteel,” said Bimha.
“First of all, I want you to understand that the ZISCO deal is not just a normal deal.
“So issues of time do not come into play.
“It is a very complicated deal. The investor did not come to Zimbabwe (on their own accord). We went out to them because we had a big problem of huge debt. ZISCO-Steel had incurred a huge debt.
“Government was a guarantor and there was no way Government was going to pay for that. So we had to look for a partner.
“What makes the deal very sophisticated is that various creditors are told we want to take over your debt, and they say no, we do not want you (to). How do you go into such a deal? It’s just a complicated deal.”
The implied walking away by ESSAR was a relief to some who felt the ESSAR deal would not benefit the country at all as the company got the resource-rich entity for a song.
Interestingly, two days later, Bimha was quoted in The Herald in an article ‘Essar is still in Zim, says Bimha’.
The minister says he was misquoted and that the ESSAR deal is still on.
So which is which?
It is almost impossible to know what is happening because of all the misinformation surrounding the giant steel maker.
However, many are of the opinion that it has been too long a wait and it is time Government let ESSAR go and look for another investor.
The Affirmative Action Group (AAG) in February advised Government to reverse the acquisition of ZISCO-Steel by ESSAR Africa Holdings, arguing the economy would not gain any significant benefits from the deal in its current structure.
“We are concerned as the AAG about the ESSAR deal which the good Parliament has chosen to keep quiet about,” said AAG President Chamu Chiwanza.
“We felt (the then minister) Welshman Ncube shot from the hip when he signed that deal.
“When we did an analysis as AAG we thought that was daylight robbery as far as us, the indigenous people are concerned.”
Another economic analyst who refused to be named concurred with AAG, saying ESSAR was holding the country to ransom and the sensible thing to do was to go to tender and find another investor.
“If the deal is surrounded with so many problems, is it not sensible for the Government to pull out of the deal and get another investor?” he said.
The study by the Zimbabwe Economic Policy Analysis and Research Unit said the country has lost over US$20 billion in potential revenue since the closure of ZISCO-Steel.
The downstream impact on the non-functionality of New ZimSteel is staggering.
Steel is the lifeblood of various industries from construction, transport to manufacturing.
As such, the cost of building a house in Zimbabwe or other commercial structures has ballooned since the closure of ZISCO-Steel due to high costs of importing steel bars from neighbouring countries, mainly South Africa.
The downstream industries in Kwekwe and nearby areas which relied on steel from ZISCO-Steel have closed shop leaving the formerly vibrant areas ghost towns now surviving off the scanty proceeds from small-scale gold and chrome mining activities.
But for how long shall the country continue to suffer while this giant steel maker remains idle?