Zvamaida Murwira Harare Bureau
The government has renegotiated the Essar deal on NewZim Steel and the investment has now risen to $1 billion from $750 million. Industry and Commerce Deputy Minister Chiratidzo Mabuwa told the Senate last week that the agreement between the government and the Indian investor was amended, and the new arrangement now awaits signing by the parties.
Matabeleland South Senator Watchy Sibanda (MDC-T), had asked when operations would resume and how much investment had been committed to the project.
“The Essar deal has been renegotiated and Essar will scale up operations as soon as the amended agreement is signed. The original Share and Asset Purchase Agreement had conditions precedent that required both parties to the agreement to fulfil first before full closure of the agreement could be realised. Fulfilment of those conditions took a long time to realise and hence, there was a delay in the closure of the transaction,” said Deputy Minister Mabuwa.
“The new agreement is currently being cleaned up for final closure by legal counsel from both parties to capture the adjusted plans as per the bid document to now encompass the additional costs associated with the time lapse since 2011 when the original agreement was signed.”
Deputy Minister Mabuwa said the value of the original investment was $750 million comprising Essar’s clearance of debts amounting to $300 million and $450 million for recapitalisation of the steel plant at Redcliff.
“This has since risen to over $1 billion owing to the changes in revival plans and obsolete nature of the plant,” said Deputy Minister Mabuwa.
She said the completion of the ongoing work such as the re-lining of blast furnace number four and refurbishment of the rolling mills, which was originally put at $430 million, had been revised to over $600 million. Local liabilities initially put at $70 million at the time of signing the deal have ballooned to $200 million.
As a result, she said, scaling up of operations had thus delayed but engineering work had already started.
She said while adjustments to the agreement were taking place, the government and Essar agreed to implement immediate interim measures that would inject some funding into NewZim Steel and also offer relief to workers.
Deputy Minister Mabuwa said no money had exchanged hands between the two parties as negotiations on the purchase of Zisco assets were expected after the closure of the transaction.