via ‘Mines ministry scuttled Zisco Essar deal’ – NewsDay Zimbabwe January 13, 2016
The Mines and Mining Development ministry scuttled the takeover of Ziscosteel by Indian firm, Essar Africa Holdings, by refusing to play ball when other stakeholders had assented to the deal, a former Cabinet minister has said.
BY MTHANDAZO NYONI
In 2010, Essar Africa Holdings agreed to buy 54% in Zisco, with the government keeping 36% and 10% owned by minority investors.
The $750 million deal never took off and the Indian firm has walked away.
In an interview with NewsDay, former Industry and Commerce minister Welshman Ncube blamed the Mines ministry for allowing the mega deal to slip through government’s fingers.
“The one ministry which would not play ball was the Ministry of Mines up until the day we left government in 2013. The Ministry of Mines would not play ball. I understand they only managed to play ball last year when they eventually agreed the thing they should have agreed to in 2009. By that time, it was too late,” Ncube said.
“So ultimately for me, the responsibility for the failure rests entirely with the Ministry of Mines because if it had acted like all the other ministries did, like the ministries of Water, Energy, Transport, Investment Promotion, including the Reserve Bank of Zimbabwe, which had only given its approval when we were in government, this thing would have been implemented in 2010-2011 and we would be somewhere different today. By the time the Mines ministry played ball with whoever was the new minister, it was too late in my respectful opinion.”
Obert Mpofu was the Mines minister at that time.
Ncube said it was unsustainable for Essar Holdings to proceed with the deal as originally conceived almost six years after the bidding process that they were involved in.
He said from his understanding and interactions with the Essar people and the ministry, government “had finally done the things that should have been done six years ago” by the time Essar was seeking to pull out of the deal.
He said in the background, a lot of things had happened, which made it very difficult to proceed with the deal, such as wage bill arrears that had ballooned to about $400 million.
“Just to pay arrears of people who remained nominally at work, but were not producing anything was in the region of $400 million. So, anyone wanting to proceed with the deal would have had to find $400 million to pay people for work that would have added no value. In other words, for work that was never done,” Ncube said.
He said the company also had a foreign debt to the Chinese, who had funded the “realigning of the blast furnaces which had been improperly done by us”.
“The realigning never worked, but was done and we were obliged to pay those who had provided the finance. That debt continued to earn interest and was also running into hundreds of millions of dollars. The German debt again was not financed. That debt continued and was also running into dozens and dozens of millions of dollars,” Ncube said.
He said there were local debts that were also accumulating even before the formation of the inclusive government in 2009.
“If you put together that debt, which was not static by the way, over the six years because interest upon interest compounded default penalties we were accumulating, you would have needed in the region of, as I understand, nearly $1 billion. Whereas when we processed this deal, $750 million would have been the total investment which would have addressed all the debts and also had enough money to refurbish the plant,” Ncube said.
“As of last year, anyone who would want to proceed with the deal would have had to say I have $1 billion to clear past things without even putting one brick, which basically means that it would have been better for anyone to go and start a green field because if you have got $1 billion, you can start a steel plant and here you are required to continue Zisco, starting with a negative of $1 billion before you do anything.”
He said by last year, it became impossible to implement the deal given the obligation of urging government to bite the bullet and take over the Zisco debt “so that whoever has to start steel production again, whether it is at Zisco or Chivhu or wherever, doesn’t have the burden of historical debt sitting on their back”.
Ncube said President Robert Mugabe had supported the deal as evidenced by his officiating at the launch of the NewZimsteel.