Zimbabwe: Essar Wants Assurance On Zisco Deal

INDIAN firm Essar recently sought clarification from government on whether it would transfer iron ore claims necessary for the finalisation of the takeover of troubled steelmaker, Zisco.

The move by Essar came after Mines and Mining Development deputy minister, Gift Chimanikire was quoted by state media as saying the ministry did not want Essar to have a monopoly over claims and that indigenous players had shown an interest in the claims.

"We don't want to create a monopoly by giving all the claims to one company. We have to allow other players, for instance, indigenous players should also be able to explore the ore," Chimanikire was quoted as saying.

"Already we have been approached by two new indigenous companies who are interested in smelting iron ore in Chivhu and Mvuma. They have very viable proposals. They have good partnership proposals."

Industry and Commerce minister Welshman Ncube said Essar had resolved that it would come back and work but were disturbed by Chimanikire's statements.

"They asked for reconfirmation about the Cabinet decision of September 9. We have given them that reconfirmation," Ncube said. "We told them this [last] week."

In September, Cabinet resolved that iron ore claims in Mwanezi should be transferred to New Zim Minerals (NZM) as the final stretch towards the revival of the former Zisco.

The iron ore would be used as raw materials at New Zim Steel (NZS).

Ncube said mixed signals from government about the deal were to blame when Essar stopped paying workers' salaries in March arguing that it would only proceed once the transaction was finalised.

"When Essar stopped paying salaries, it was Chimanikire who had issued statements. When we are about to start he [Chimanikire] issued a similar statement that the Ministry of Mines will not abide by a cabinet decision," Ncube said.

After announcing a US$750 million investment into Zisco last year, Essar has been finding it difficult to conclude the deal due to bureaucracy in government over the transfer of iron claims to NZM. The claims are at Bimco, Ripple Creek and Mwanezi.

The deal, when completed, would result in government having a 40% stake in NZS with the balance owned by Essar. Under the NZM arrangement, Essar and government would have 80% and 20% shareholding respectively.

Essar sees the conclusion of the transaction as the Trojan horse for foreign investment into the country.

"There are a lot of people like us waiting in the wings who are ready to make investments in Zimbabwe. They keep telling the ministers 'let's see what happens'. If this deal gets completed and implemented, it will be a Trojan horse for much more foreign investment because people will say if Essar can do a deal with a government of Zimbabwe, surely I can do a private mining deal with an indigenous company," Firdhose Coovadia, head of Middle East and Africa told Standardbusiness in June.

What the delays mean for Essar

The delay in finalising the transaction means that the cost of running the project is increasing.

The company has to inject more than US$600 million to produce a million tonnes of steel per annum at NZS, double the amount the firm had projected.

According to Essar's plan unveiled last year, US$115 million would be injected in NZS under phase 1 with a projected output of 500 000 metric tonnes per annum within 18 months.

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