Source: Govt to trim Zisco bidders in January | The Herald December 27, 2016
Conrad Mwanawashe Business Reporter—
GOVERNMENT expects to come up with a short-list of potential investors to take over Zimbabwe’s largest steel maker, Zimbabwe Iron and Steel Company, by end of next month.Ziscosteel, once one of Africa’s largest steel works, has been not been operational since 2008 following viability challenges and mounting debts, had seemingly received a new lease of life when an Indian investor Essar Africa Holdings struck an agreement with Government in 2010 to take over Zisco, but the $750 million deal collapsed due to various reasons.
Some of the reasons include the haggling during the inclusive government which led to delays in the implementation of the deal. And while the haggling raged on commodity prices, which were firm at the time the deal was consummated, were falling.
Also, the condition that Essar was suppose to take over Zisco’s debt remained a sticking issue between the parties. As a result, Essar pulled the plug arguing that commodity prices had fallen and therefore the Zisco investment was no longer as lucrative. But Government has since removed the conditions that caused the Essar deal to fail to take off, Industry and Commerce Minister Mike Bimha said last week.
As such, interest in the steel company has increased now that Government announced willingness to clean up its balance sheet. Minister Chinamasa said Government will take over its debt while commodity prices are firming up.
“We are very positive that we will resuscitate Zisco sooner rather than later. I am happy to report that now the prices are firming and it’s encouraging therefore we do have a lot of investors interested. At the moment we have a number of investors looking at our bids and we believe that we should be able, at the end of January to make a short-list of the investors,” said Minister Bimha.
However, Government is not coming up with the same prospectus as before as there are a number of areas that have been changed.
“In the past we used to require those who wanted to invest in Zisco to take over the debt that Zisco had incurred. But the Minister of Finance and Economic Development, Patrick Chinamasa announced that Government is taking over the debt so that an investor comes to take over a clean investment without getting his hands on a debt that has nothing to do with him. When we required investors to take over that debt, there was interest from investors; what more now when we no longer want investors to take over the Zisco debt,” said Minister Bimha.
He explained that the reason why Essar pulled out was because of the haggling in Cabinet during the inclusive government. Essar had waited patiently but nothing was coming.
“When the new establishment came into place we quickly attended to the issues that were still outstanding and it was now up to Essar to come on board.
“Essar was still willing but they pointed out that at the time they would not want to make a huge investment in iron and steel because the commodity prices had gone down. So it was no longer a lucrative type of investment for one to consider,” he said.
Government has also come up with another approach where discussions are ongoing between the Ministry of Finance and Economic Development, the Reserve Bank of Zimbabwe and the Industry and Commerce Minister with a view to getting funding to initially resuscitate and strengthen companies such as Lancashire Steel and Zimchem, which take some of Zisco’s products for further value addition.
Zimchem is the sole manufacturer of road tars, industrial solvents and wood preservatives while Lancashire Steel, also a subsidiary of Zisco, specialises in fencing and wire products.
The consideration is for Lancashire Steel to import steel billets to produce fencing and wire products.
“We also want to get Zimchem on board to feed road construction such as the dualisation of the Beitbridge-Chirundu highway.
“Our determination is to make sure that we finalise the resuscitation as a matter of urgency. We are leaving no stone unturned. We have assigned some members of staff in our ministry, who are dedicated to this investment on a daily basis,” said Minister Bimha.
Furthermore, Government is looking at the entire steel making sector and are inviting other investors who may want to set up other steel manufacturing companies.