The Sunday Mail
THE marathon discussions that have been ongoing to try and salvage the deal between Government and Essar Africa, the new investors in New Zim Steel — formerly Ziscosteel — seem to have yielded a sure way forward as various sources indicated last week that the two parties had found each other.
Essar Africa Limited’s director-Africa and Middle East Mr Firdhose Coovadia has been in the country for crunch talks since October 15.
Through the deal, which was launched in March 2011, Essar snapped up a 54 percent stake of Government’s 90 percent shareholding, with the former agreeing to take over Zisco’s foreign debt which amounted to US$300 million and to share the company’s domestic liabilities that totalled US$72 million, based on the equity structure. The domestic debt has since ballooned to US$200 million.
Government is now seized with addressing the domestic debt issue, which was thought to be the biggest stumbling block to the operationalisation of the 2011 agreement. It is believed that Government is working on modalities of liquidating part of Zisco’s local debt.
Industry and Commerce Minister Mike Bimha recently said they have engaged Finance and Economic Development Minister Patrick Chinamasa to “find a solution” to the debt problem.
Essar were hesitant to assume the debt fearing lawsuits. A New Zim Steel official who spoke on condition of anonymity told The Sunday Mail Business last week that an agreement has now been reached, and will be wrapped up this week when Essar Holdings officials arrive on Tuesday.
“It is correct (to say that an agreement has been reached). There are no more issues remaining. In terms of the domestic debt, there was always an agreement but it is only that the money wasn’t there and the debt has now grown.
“The expectation was that after signing the deal in 2011, we were going to start work in three months but that did not happen because money to settle the debt was not available and there are processes that also had to be followed.
“Now we expect the deal to be finalised next week (this week) when Essar officials arrive on October 28 from India.
“In terms of when the project will start, I would say anytime after next week because our Indian partners contracted some Chinese to work on the plant. At the moment, the contracted Chinese firm is working on the map of the plant to say what goes where. So we expect that after the coming in of our Indian partners, the Chinese will immediately arrive to work on the plant but they have indicated that most of the equipment is antiquated and would have to be replaced,” said the New Zim Steel official. Asked why it took long to operationalise the project, the official said Government, as a shareholder, could not bring funds as quickly as expected.
“As you are aware, Government is a shareholder and was supposed to bring in money but could not do so on time. So what do you do when another partner does not bring in money into a project?” said the New Zim Steel official.
A number of other sources confirmed in separate interviews that a deal was done. In a telephone interview from his Mauritius base last week, Mr Coovadia noted that a deal may not be too far off.
“There has been a lot of positive developments in respect of that deal. Yes, yes, there has been a lot of movement on the New Zim Steel deal. I will be back in Harare soon,” said Mr Coovadia curtly.
Industry and Commerce Deputy Minister Chiratidzo Mabuwa also hinted last week that a deal could have been struck but referred further questions to Minister Bimha. “I cannot comment on the issue because the minister is around. I only talk when he is not around. Talk to the minister he will give you the details but I know you will get a lot of joy from the minister,” said Deputy Minister Mabuwa.
Efforts to get a comment from Minister Bimha were fruitless as his secretary repeatedly said he was out of office.
He was also not answering his mobile phone.
Sources in the Zimbabwe Investment Authority (ZIA) claimed that an agreement between Government and Essar has literally been thrashed but referred further questions to Minister Bimha.
“There is good news in respect of the Essar deal. It had taken long but we are happy something substantive is in place,” said the ZIA official.
Once the deal is operationalised, Zimbabwe could re-establish itself as a steel hub and could create thousands of direct and indirect jobs.
Mid this year, Essar indicated it would invest US$650 million over a two-year period for the erection of a 500 000-tonnes steel plant.
Estimates suggest that Zimbabwe requires 100 000 tonnes of steel per annum, implying the balance would be exported. In the second phase, Essar plans to raise steel production to one million tonnes. The company has also indicated its intentions to build a US$1,2 billion rated 600 megawatt power plant in Hwange to ensure uninterrupted power supply to its New Zim Steel operations.
Analysts say when operations resume at New Zim Steel, Redcliff’s lost glamour will be restored.
More importantly, Zisco’s 3 000 former workers, most of whom can no longer afford medical bills while others are now homeless after being locked out by the Redcliff Municipality for non-payment of rentals, will live decent lives.
It is also believed that the operationalisation of the Essar project, which was on ice for close to four years, would rekindle investor confidence in Zimbabwe.
Indian Embassy to Zimbabwe First Secretary and Charge d’Affaires Mr Rakshpaul Singh Malhotra recently insinuated that the Essar deal was almost complete, adding that given its magnitude, more investors might now flock to Zimbabwe to explore opportunities.
“We are given to understand, of late, that the Zimbabwean side have completed their part of the contract or obligation and it is now for Essar to meet their part of the obligations.
“There are some loose ends being tied up but what exactly, where exactly with the issue; they won’t easily share because it is between the company and your Government. We have no definite information, but whenever we meet authorities on the Zimbabwean side, we do try to check if there is an occasion for us,” said Mr Malhotra.
He said as an embassy, they were “concerned” by delays in concluding the Essar deal, adding that its conclusion would rekindle investor interest in the country.
“Of course if you ask me, and given that this is a mega deal, as an embassy we feel that it should be expedited or come to some kind of implementation stage.
“Generally we would want this to happen quickly but ultimately it is up to the Government of Zimbabwe and Essar to conclude it. Our concern is just general, but as I said we would like this to materialise, that is our wish.
“Needless to say, if a mega deal like this materialises, it will certainly signal to other many investors looking for opportunities in Zimbabwe from India to see this as a positive development and will encourage other companies to come and invest. It is needless for me to emphasise this fact,” said Mr Malhotra.
He also said as an embassy they were eager to see Indian companies in Zimbabwe succeeding.
Essar traces its roots to India.
“. . . we will certainly like that company (Essar) to be successful and if there is any legitimate thing that the embassy can do for them in facilitating, then yes of course, the embassy tries.” He emphasised that Zimbabwe and India have cordial relations and “we speak to each other on many issues”, adding that he would want to see mutually beneficial collaboration between the two countries for the benefit of the countries’ companies. There are a number of Indian companies and others that have links to Indian companies which operate in Zimbabwe.
They include Tata Motors Limited, BELM Limited and Dunlop Tyres, which collaborates with Apollo Tyres of India through South Africa.
Apollo Tyres is the world’s 17th biggest tyre manufacturer, with four plants in Netherlands, South Africa and Zimbabwe. Mr Malhotra said given that Zimbabwe is blessed with precious minerals such as diamonds, gold, platinum and other vital minerals such as iron ore, coal, and “a very promising agricultural sector”, it was imperative that the country took advantage of its minerals to boost its economy.
