Zisco revival: Ball now in Essar’s court

via Zisco revival: Ball now in Essar’s court – The Zimbabwe Independent June 19, 2015

THE ball is now in Indian firm Essar Africa Holdings’ court to deliver after government removed all obstacles hindering the US$750 million deal to revive the now defunct Ziscosteel, which was once part of the economy’s backbone.

Faith Zaba

In an interview with the Zimbabwe Independent on Wednesday, Mines and Mining Development minister Walter Chidhakwa said government has had several meetings with Essar during which all hindrances that were obstructing the implementation of the deal were ironed out. He said it was now up to Essar to start operating after paying the required mining fees of US$400 000.

In March 2011, government sealed the US$750 million deal with Essar resulting in Ziscosteel being unbundled into two companies, NewZim Steel and NewZim Minerals.

The deal gave Essar 54% control of NewZim Steel. As part of the deal, Essar was also awarded 80% ownership of NewZim Minerals with government holding the remaining 20%.

Until now, however, the deal has not been consummated due to haggling over iron ore deposits, although cabinet made a series of resolutions on the issue and Chidhakwa says all problems have since been fixed.

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 Neveen Jindal-headed Jindal Steel and Power Ltd from India.

Chidhakwa told the Independent: “The first thing is that the Essar deal has been embraced by government and cabinet has actually set up a (inter-ministerial) committee that is responsible for the implementation of the project, recognising obviously that we previously had a steel plant and now we don’t have.

“We need to have a steel plant if we are going to get ourselves involved in infrastructure development. We cannot do so on the basis of imported steel. We need a steel plant and the Essar deal offers us the opportunity to regain our status as one of the few countries in Africa that produce steel.”

Delays in implementing the deal have been due to friction between the then Minister of Mines and Mining Development Obert Mpofu and former Industry and Commerce minister Welshman Ncube, forcing the Essar/Ziscosteel issue to be referred to cabinet.

Mpofu pushed for the deal to be revisited arguing that Essar would only be paying US$750 million for resources worth over US$30 billion.

But Chidhakwa said he has cleared the obstacles to implementation of the project.

“As the Ministry of Mines, we have had extensive meetings with Essar, accompanied by the Minister of Industry (Mike Bimha). I have had one-on-one meetings with the Minister of Industry on the issue. We have listened to all the problems that were there and we ironed them all out,” he said.

“We told them (Essar) that if there is anything, we have instructed all our officers to deal with the matter urgently because the government wants to see the revival of the steel plant. So we are in full support and we have done what is necessary. If there is still anything, we are open and ready to implement as soon they come and pay their fees of US$400 000, which we cannot waiver.”

However, a senior official in the Ministry of Industry and Commerce claimed this week that Essar does not actually have the money to undertake the project.

He said the delays in implementing the project were now on Essar’s side and not government as is widely believed.

“We are done. This is a government decision. On our side we have done everything necessary and we have communicated to them. That’s it; they can now start,” the official said.

“But personally, I don’t think they have the money to implement the project. Remember there is also the debt assumption and issue of workers’ salaries which have not been paid for years.”

Under the deal Essar was supposed to take over Zisco’s foreign debt which amounted to US$300 million, and part of local liabilities.
The deal also seems threatened by government’s US$50 million debt to one of China’s largest steel companies, Shougang Corporation, for the upgrade of Ziscosteel blast furnace four which was completed in 1998.

Shougang has now requested that government hand over the iron smelter to them in lieu of the debt, which means Essar’s plans could go up in smoke should the Chinese get their way.

The total domestic debt is believed to be over US$200 million.
Further complicating matters around the deal, the sources said, is the move by German bank Kreditanstalt Fur Wiederaufbau (KfW) to call its debt of US$187 million as of May 2014, accrued by Ziscosteel to fund its operations.

Ziscosteel borrowed the money from the bank and other commercial institutions against its exports, but has since failed to repay the loan dating back to 1998. Essar has balked at paying the debts.
Bimha was not reachable as he was said to be out of the country, while an Essar representative in Zimbabwe refused to comment.
When the Independent called the Essar representative three weeks ago he requested that questions be sent to company spokesperson Sabina Chitehwe.

The questions requesting an update on the project were e-mailed to Chitehwe on June 1. On Wednesday an Essar representative said: “There is nothing much to say at the moment.”

Essar Global Holdings last year was mired in debt. According to an online publication, World Finance, the group was as of August 2014 “not in the finest financial health, with soaring debt and struggling assets in iron ore”.

It seems the relief that Ziscosteel’s over 3 700 workers are expecting is still a long way off. Workers whose salaries were suspended are owed more than US$12 million.