Fresh hurdles for Zisco’s $1bn deal… Govt unhappy with original agreement

04 Jan, 2019 - 00:01 0 Views
Fresh hurdles for Zisco’s $1bn deal… Govt unhappy with original agreement Kuvimba Mining House ZISCO takeover, can it bring back the old golden glory?

eBusiness Weekly

Martin Kadzere
Government has set new conditions to a Chinese investor seeking to acquire shareholding in the Zimbabwe Iron and Steel Company after it emerged the original agreement could have left the country at a “greater disadvantage”, Business Weekly can reveal.

The deal-sealed during the administration of former President Mugabe — entailed acquisition of Zisco’s 100 percent shareholding by R and F and the resuscitation of its Redcliff-based steel and iron plant to the tune of about $1 billion.

Following the review of the deal under the new dispensation, it came out the transaction had not been negotiated in “good faith” as the investor could have literally acquired once Africa’s largest steelworks plant for “nothing”, according to sources.

Apart from the mineral claims held by Zisco’s subsidiary, some of the assets that had not been factored when the deal was negotiated include the company’s large real estate and a huge stockpile of scrap metal with estimated value of $40 million.

According to the sources, the Government has since come up with fresh conditions that would form the basis for negotiations.

“The Government had literally given away everything,” said one source who requested to remain unanimous because the matter is sensitive.

“Under the original agreement, this Chinese investor could have acquired Zisco for nothing.”

“How was the Government going to justify such an investment to the nation?

“So these are some of the sticking issues and what the Government did was to make fresh proposals to try and salvage the situation; the investor has not yet responded.

The money they proposed to invest-although still questionable -is way below what these guys would have gotten had the transaction sailed through, another source said.

Zisco closed operations in 2008 after it was hit by operational and financial challenges. Essar Africa Holdings, a unit of India’s Essar Group, had agreed to invest in Zisco in 2011 but the deal collapsed in 2015.

This was after a similar deal with another Indian company Global Steel Holdings, failed to materialise.

Essar planned to build a new steelworks complex, replacing the antiquated plant and exported it via a terminal it wanted to build in the port of Beira, Mozambique. The company was also looking into the feasibility of building iron ore and coal terminals at the port of Beira.

No comment could be obtained from Nqobizitha Ndlovu, Industry and Commerce Minister by the time of going to print. But addressing delegates at the Confederation of Zimbabwe Industries conference in Bulawayo in September last year, Ndlovu expressed dissatisfaction in the manner the deal was progressing.

“We do have an interest and an investor who expressed interest some time back.

“I think it’s now two years if I am not mistaken. Obviously, we are not satisfied with the progress made on that part,” Ndlovu said.

“So, we were looking at ways in which perhaps we could open up for more interested investors but it’s going to take some bit of time and I want to presume we need to avoid infringements on the part of the person who has made the forefront. So will make progress in the near term.”

Since then, several meetings between the government and R and F have been held trying to find a solution to the sticking issue, another source said.

Last year, the Government took over both the external and domestic debt of Zisco of nearly $500 million as it sought to clear its balance sheet and attract investments.

Ziscosteel owed $211 912 400 in external loans, $6 095 620 to external suppliers, $57 696 085 in domestic loans and $219 113 219 to domestic suppliers, utilities and statutory obligations. This brought the total Ziscosteel debt to $494 817 324 million.

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