Guarantees stall Zisco deal

the Ziscosteel sale deal.
The guarantees relate to assurances on uninterrupted power supply and water, coal and the fiscal concessions critical for the revival of Zisco.
Government gave the guarantees after selling 54 percent of its shareholding in Zisco to Essar. The transaction was valued at US$750 million.
Sources said while the ministries of Water, Finance, and Energy were yet to fulfil the Government guarantees, the major sticking points related to power supply and concessions for coal mining claims.
“The guarantees have not been given and Essar is still waiting,” said a source. “Essar’s plans for Zisco are ready, but it cannot start work.”
This could delay Essar’s plans to start production within the next 12 to 15 months. Due to the outstanding issues, Essar has not started clearing Zisco’s US$22 million salary-related arrears to workers.
Essar’s officials have been at Zisco since December last year, studying requirements for the revival of the steel company. But the company will not start work, as doing so without the guarantees would not be sustainable.
Industry and Commerce Deputy Minister Mike Bimha said his ministry had little control over line ministries that would provide the guarantees on key enablers made by Government to Essar Africa.
“This requires all the stakeholders to buy into the initiative,” he said.
He added that Essar had since engaged the Government to try and ensure it honours the pledges it made before the signing of the Zisco deal.
It emerged that while the deal was sealed, outstanding issues have stalled the transfer of Government shares in Zisco to Essar.
Essar had reportedly demanded guarantees on either access to power from Hwange Colliery or significant voting rights in the coal mine.
It had also demanded rights to run Munyati Power Station, which it would immediately refurbish to meet its urgent power needs.
The Mauritian firm indicated it had medium-term plans to set up a new power plant to meet power needs as it intends to expand Zisco’s capacity.
It was not immediately clear what was holding up the Government ministries from fulfilling guarantees made before the signing of the deal.
But Mines and Mining Development permanent secretary Mr Thankful Musukutwa said there were “some complications” on the matter.
He referred Herald Business to Ziscosteel’s parent ministry for the details, as they were better-placed to respond on the issue.
The revelations put a damper on hopes for the revival of Zisco, which stopped operations in 2008 due to financial constraints.
At its peak, Zisco produced about one million tonnes of steel a year and employed over 4 000 workers. It was the base upon which local industry was built. Currently, Zimbabwe imports steel.
Essar had agreed to take over Government’s US$240 million debt, pay off salary arrears to workers and inject fresh capital to revive the firm.
It also planned to invest in the National Railways of Zimbabwe and Zesa Holdings to improve transport and power supplies.