ZimCoke takeover of Zisco assets frozen

Source: ZimCoke takeover of Zisco assets frozen | eBusiness Weekly

ZimCoke takeover of Zisco assets frozen

Martin Kadzere Senior Business Writer
The takeover of state-owned Zimbabwe Iron and Steel Company (Zisco) assets by ZimCoke, a Mauritius registered firm fronted by former Bulawayo South legislator Eddie Cross, is hanging in the balance after authorities proposed the disputed deal to be renegotiated.

The deal entails ZimCoke assuming US$225 million Zisco debt owed to German bank KfW GBMH for the assets.

The assets include 328 hectares of land worth US$16 million, plant and machinery valued at US$168 million, railway wagons and related infrastructure (US$4 million), 48 percent shareholding in ZimChem (US$23 million) and waste products plant (US$16 million). What makes the deal even more controversial, is that the Zimbabwean inter-ministerial taskforce, which was engaged in negotiations with R&F, a Chinese company which had signed a US$1 billion investment agreement with Government in 2017, was not aware of the ZimCoke deal, only to realise it during its fifth visit to China.

R&F pulled out of the deal on December 19 last year.

“There seems to be a consensus within Government that the deal is really bad and should be renegotiated. Processes, which were disregarded when the deal was signed, including conducting a proper due diligence and valuation of assets need to be re-looked.

“In its current form, it will be injustice for Zimbabweans to allow transfer of assets to ZimCoke,” said a source who requested not to be identified because the matter is private.

ZimCoke is already seeking tax clearance certificates to facilitate the transfer of the assets.

ZimCoke lawyers — Titan Law has written to Zisco requesting a representative for interviews at the Zimbabwe Revenue Authority, a procedure in transferring the assets. Finance and Economic Development Ministry had already agreed to settle the capital gains tax liability of $10 million arising from assets transfer despite the deal being disputed.

Industry and Commerce Minister Dr Sekai Nzenza told Business Weekly that she met her Finance and Economic Development counterpart, Professor Mthuli Ncube over the matter and “agreed on way forward”.

However, she was not at liberty to discuss the matter citing confidentiality and protocol issues. Efforts to get a comment from Cross proved fruitless by the time of going to press as his phone was not reachable.

Prof Ncube could not be reached for a comment this week. Zisco acting chairman Dr Gift Mugano, maintains the deal should be revoked and the position remains the same.

Zisco stopped operations in 2008 due to lack of capital to recapitalise and poor management. With its furnaces having capacity to produce up to one million tonnes annually, the company was among Zimbabwe’s major foreign currency earners.

The controversial transaction has been marred with acquisitions and counter acquisitions, with the Zisco board claiming the deal is “a typical case of asset stripping”.

Cross blames the board for sabotage. According to Cross, the agreement was signed in July 2017, but due to delays caused by the valuation of assets, and that the company had to deal with two different Governments, the deal was re-activated in July last year.

Last year-after its appointment — the Zisco board directed the management to analyse the ZimCoke deal and its impact on the resuscitation of company. A decision was then taken to terminate the deal on the basis that it made the revival of Zisco impossible since some of its major components would become inaccessible. The board cited gross violation of Public Entities and Corporate Governance Act since the previous board led by Nyasha Makuvise, was not involved.

In fact, the former board chairman signed exoneration letters, confirming they were not involved in the deal. The board also claims that valuations of assets were not properly done.

The Cabinet was advised about the deal that in its original form would impinge the revival of Zisco as an integrated steelworks.

A decision was made to review the deal but the board held on to its earlier position after it was realised that the debt, which the ZimCoke purported to have taken over was still in the books of Zisco.

In a letter to the Ministry of Industry and Commerce in February this year, Finance and Economic Development secretary George Guvamatanga confirmed there was no communication yet from KfW agreeing to take over the US$225 million debt.

But he indicated Attorney General and the Public Debt Management Office is facilitating agreement. Recently, Cross claimed the agreement had been finalised with KfW.