13 February 2013

Zimbabwe: Essar-Zisco Deal Nears Conclusion

NEW ZIM STEEL chairman Mr Nyasha Makuvise says the Essar-Zisco deal will be wrapped up soon as the parties involved tie the loose ends delaying implementation of the US$750 million transaction.

An inter-ministerial committee and Essar are now working on the sticking issues holding up the implementation of the multimillion-dollar deal.

Mr Makuvise told the Portfolio Committee on Industry and Commerce yesterday that the involved parties were working on implementing "what was agreed".

"From what we gathered in our last meeting, we really think that things are almost there," said Mr Makuvise. We cannot say tomorrow, but it will not take much longer. The committee is working on implementing what was agreed."

The committee had expressed concern over the delays and wanted to know why it was taking so long to resuscitate the firm, three years after the signing of the pact. New Zim Steel chief executive Mr Alois Gowo said the committee and Essar were finalising a roadmap which would determine the amount needed to restart.

The revival of Zisco will bring relief to over 3 000 workers who have gone for a year without salaries after Essar Group suspended payments in March last year.

This forced the company to dispose of some sundry products to pay salaries although the money raised was not enough to meet even a quarter of its payroll obligations.

"All employees are having quite a big challenge in meeting family obligations inasfar as paying school fees, paying rentals . . . and the general day-to-day upkeep because of lack of salaries either from the new partner or the old management," said Mr Gowo.

"On our part, we have been trying as much as we could to sell sundry products, raising whatever we can, but that (was) not good enough.

"If we manage to pay a quarter of the salaries, that would be a major achievement."

Essar, a company incorporated in Mauritius, emerged as the preferred bidder for Zisco and the iron ore resources that it owned after beating 14 other investors including the world's largest steelmaker by capacity, ArcelorMittal and the Naveen Jindal-headed Jindal Steel and Power Ltd from India.

Essar Group agreed to buy a 54 percent shareholding in Zisco and 80 percent in Buchwa Iron Mining Company, the firm's resource arm in 2010, but some sticking issues over mineral rights have delayed the conclusion of the transaction. The pact gave birth to New Zim Steel, an iron smelting company, and New Zim Minerals.

Essar, a global steel player, had committed to revive the plant to its original capacity and spelt out a long-term vision to double capacity to 2,5 million tonnes a year. It also said that New Zim Minerals would undertake exploration and technology assessment and testing programme would ensue 18 months after the deal is finalised.

After this, depending on the outcome, Essar will construct a large-scale beneficiation project and related infrastructure, including a power plant for US$3,5 billion. The deal ran into problems after the Mines and Mining Development Ministry felt that some procedures had not been followed particularly on New Zim Minerals' shareholding and delayed transfer of mineral rights to the new investor.

Following a series of negotiations, Cabinet finally resolved the deal be implemented as agreed.

It will take up to 15 months to start producing steel upon implementation of the deal, Ravi Ruia, Essar Group vice chairman, told journalists after the signing of the deal.

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