aurora
Martin Kadzere
Plans by ZimCoke to take over the assets of Zimbabwe Iron and Steel Company (Zisco) has taken a new twist after the investment vehicle fronted by former legislator, Eddie Cross, claimed the debt assumption agreement with the German bank, KfW GBMH, has been finalised and will be signed soon.
Cross told Business Weekly that ZimCoke was forging ahead with the deal — contrary to Zisco board, which insisted last week that the transaction was “dead and buried”.
The deal involves ZimCoke taking over Zisco’s debt amounting US$225 million owed to Frankfurt-based KfW in exchange of its assets. The assets include land measuring 328 hectares (US$16 million), plant and machinery (US$168 million), railway wagons and related infrastructure (US$4 million), 48 percent shareholding in Zimbabwe Chemicals (US$23 million) and waste products plant (US$16 million.)
Upon assuming office, the board directed the management to analyse the ZimCoke deal and its impact on the resuscitation of once Africa’s largest integrated steelworks.
A decision was then taken to terminate the deal on the basis that it made the revival of Zisco impossible since some of its major components would become inaccessible.
The board also noted the previous board was not involved in the negotiations and no proper valuations of assets were done. In their view, the transaction amounted to asset stripping.
The decision to terminate the transaction was then communicated to the Cabinet, which “positively” noted some of the concerns and directed the deal to be reviewed.
One of the condition for reviewing the deal was that the Ministry Finance and Economic Development provided confirmation that US$225 million debt had been transferred to ZimCoke from Zisco’s balance sheet. But that turned out not to be the position.
“I write to confirm that there is no communication from KfW agreeing to move debt from Government to ZimCoke,” Ministry of Finance permanent secretary George Guvamatanga wrote to his Industry and Commerce counterpart Dr Mavis Sibanda.
“However, the Ministry of Finance has received a draft tripartite agreement between Government, ZimCoke and KfW which was reviewed by the Attorney General and the Public Debt Management Office is facilitating the signing of the agreement.”
Last week, Zisco acting board chairman Dr Gift Mugano, however, told this publication that it had resolved not to re-negotiate the deal after learning that no debt had been transferred from Zisco to ZimCoke.
“The debt was not taken off so there is no point for renegotiations,” Zisco acting chairman Dr Mugano said.
“So we maintain our earlier position and we will advise the authorities accordingly.
“We were going to use moral suasion to re-consider our position; to see what can be salvaged but that is quite difficult when the debt which was purported to have been taken over still remains in our books. If the debt had been transferred, then obviously we would have reconsidered our position as per cabinet directive.”
This week, Cross said the agreement of sale of the coke assets of Zisco to ZimCoke was signed in July 2017, but was delayed due to issues related the valuation of the assets and also the fact that the company had to deal with two different Governments since that date.
He said ZimCoke was now waiting for a Rates Clearance Certificate and a Capital Gains Tax Clearance from the Zimbabwe Revenue Authority to facilitate asset transfer.
“The debt assumption agreement has been finalised with the German bank KfW and will be signed by
all parties when the transfer of title is effected (one week after the two Certificates are issued).
“We then have six months to complete the conditions precedent in this agreement. Once title is secured and the KfW Agreement signed we are in business,” said Cross.
Cross said Rates Clearance Certificate issue had been held up by the valuation while interviews for the Tax Clearance Certificate was being arranged.
He said the Ministry of Finance agreed to pay the Capital Gains Tax of $10,2 million. No comment could be immediately obtained from Finance Ministry by the time of going to print.
“We plan to start with the materials infrastructure, the repairs to battery number three and the rebuild of battery number four…the repair or replacement of all service units and the by-products plant.
“At the same time, we will be bringing the capacity of Zimchem.
“First production is expected in six months with the plant up to operating capacity of 10 000 tonnes a week in the next six to nine months.”
Cross said ZimChem would be working with other partners to repair the railway lines from Hwange to Redcliff, all internal rail sidings at Redcliff and the line to Beitbridge from Redcliff. Further, it would also be working with the new wagon manufacturing plant in Bulawayo to create a fleet of 500 units and 25 locomotives to move the bulk products as well as rehabilitating the Redcliff water system.
Once this phase is completed, ZimCoke would consider rebuilding coke oven batteries.
This would cost US$50 million and raise production to 800 000 tonnes a year.
To ensure adequate coal supplies, a proposal has been made to Hwange Colliery to take over its underground mine.
If this is secured, ZimCoke would invest in the mine and the required infrastructure including washing plant and loading facilities.
Bongani Ndlovu