19 December 2012

Zimbabwe: Cabinet Okays Essar Deal

Photo: IRIN
Zimbabwe's capital, Harare

OPERATIONS at New Zim Steel are expected to resume next month after Cabinet guaranteed the investor that the initial deal signed between the Government and Essar Group stands.

This brings relief to over 3 000 workers who have gone for almost a year without salaries after the investor suspended payments in March this year.

The investor, who is apparently impressed by the latest arrangement, reportedly agreed to pay the workers before Christmas.

Industry and Commerce Minister Welshman Ncube said the Essar Group had requested a Cabinet guarantee that there would be no changes to the original deal signed between the Government and Essar last year.

"This was sparked by statements that were attributed to (Gift) Chimanikire (Deputy Minister of Mines and Mining Development) in the media recently that they were not going to give New Zim Minerals iron ore claims at Mwanesi," said Minister Ncube.

According to the original deal, Essar Group would take 53 percent of New Zim Steel (former Ziscosteel-manufacturing arm) and 80 percent of New Zim Minerals (former Buchwa Iron Mining Company - mining arm) while the Government takes the remaining shares in both firms.

Minister Chimanikire recently told The Herald that his ministry was not going to "give away" mining claims at Mwanesi Ranch that have rich ore deposits.

He said there was a need to avoid a monopoly by giving other players an opportunity to mine iron ore at Mwanesi in Chivhu.

Said Minister Ncube: "The investor then requested that the Office of the President writes to them telling them the correct position. Their problem was that Government was speaking in so many contrary voices.

"The Office of the President and Cabinet then wrote to Essar Group last week Tuesday telling them that the Cabinet decision of September 10 this year confirming the agreement of March last year was going to stand."

"The Essar people then responded to us this morning (yesterday) expressing their happiness with the Chief Secretary's letter (Dr Misheck Sibanda). What we have now agreed is that we will have ameeting between Essar, ourselves and our colleagues in the Ministry of Mines and Mining Development to finalise all the issues to do with joint exploration and the transfer of mining rights to New Zim Minerals.

"We are hoping to have that meeting before the end of this month," said Minister Ncube.

He said his ministry had been negotiating with Essar Group to pay workers some money ahead of the festive season.

"They (Essar) are sympathetic to the workers' cause so in principle they have agreed to pay the workers some money before the Christmas holidays so that they can go to the holidays with something," said Minister Ncube.

Industry and Commerce deputy Minister Michael Bimha concurred with Minister Ncube.

"The position is that Cabinet made a resolution a long time ago and that has since been communicated to Essar. As far as the ministry is concerned whatever decision is made by Cabinet is the final decision and that is what we do.

"We will follow the Cabinet resolution that was made sometime in September.

"We are now expecting them to resume operations because for a long time they have been waiting for us to make a decision (on iron ore claims) and now that the decision has been made, they should start operations soon," said Deputy Minister Bimha.

The deal at one point hit a brickwall after Mines and Mining Development Minister Obert Mpofu expressed reservations with the 80 percent shareholding of iron ore reserves by New Zim Minerals.

He said the deal was supposed to be revisited because Essar Group would pay only US$700 million for resources worth over US$30 billion.

Minister Mpofu told a Parliamentary Committee that iron ore reserves in Mwanesi near Chivhu, which are supposed to be controlled by Essar Group under the agreement, had a cumulative value of US$30 billion.

Government recently endorsed the implementation matrix that was agreed to by the Government and the Essar Group management.

It is now up to the Essar Group board to give a position on the matrix.

Government, Minister Ncube said, had resolved all the issues around the supply of water and energy, transportation of coal and steel and investment incentives, which it was supposed to do.

On its part, the investor, Minister Ncube said, was supposed to take over the plant and set up a US$10 million fund for the youths and small to medium enterprises.

He said Essar Group was also supposed to pay the Zisco debt to China and Germany.

Minister Ncube recently said Essar Group workers who have not been paid since March this year would be paid as soon as the operations resumed.

Essar Group stopped paying salaries to its employees in March this year amid indications it had forked out millions in wages without production.

The firm was reluctant to continue pumping money into New Zim Steel which is yet to get iron ore mining rights from the Government.

The Redcliff-based company owed its employees over US$12 million, a debt it assumed from Ziscosteel.

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