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Mauritian-based firm, owned by Indian multinational Essar Global, acquired a 60 percent stake in the former steel giant in March 2010 in a record US$750 million deal.
Prior to the acquisition by Essar Africa, the Government of Zimbabwe owned 80 percent of what is now called NewZim Steel.
The announcement was made by Industry and Commerce Minister Professor Welshman Ncube to a Parliamentary Portfolio Committee on Industry and Commerce last week.
The minister was responding to members of the committee who questioned whether the Indian company would be compelled to meet the requirements of indigenisation and empowerment laws.
In terms of the Indigenisation and Economic Empowerment Act, foreign-owned companies are required to sell at least 51 percent to indigenous black Zimbabweans.
Minister Ncube said the exemption was an incentive to the Indian firm for agreeing to clear US$350 million external debts owed by NewZim Steel.
He said part of the requirements of the bidding process included demonstrating how the winner would deal with the debt, which the Government and Ziscosteel had little or no capacity to pay off.
“Essar is exempt from complying with the 51 percent requirement until such time when they have traded and made money to recoup their investment — that is the understanding,” said the minister.
Minister Ncube said Essar was more appealing to Government than any other bidder in the second round after agreeing to take over the debt.
In the first round of bidding an inter-ministerial committee had recommended ArcelorMittal of South Africa. But the Executive rejected the bid, saying it was not in the “national interest”.
“In the second round, even if ArcelorMittal had submitted their bid, we would still have chosen Essar because they agreed to take over the Zisco debt.
“ArcelorMittal had said they would resuscitate the company and it would repay its debts when it started trading,” he said.
Economic Planning and Investment Promotion Minister Tapiwa Mashakada last week said the 49 percent maximum foreign ownership may not apply to all investors, as
variations can be considered where an investment is determined to be of strategic importance. For instance, considering the strategic nature of banking and capital constraints in Zimbabwe, Ecobank was allowed to acquire 70 percent of Premier Banking Corporation for it to meet regulatory capital requirements.
Online Reporter