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Harare Bureau—
THE government is working on modalities to liquidate part of Zisco’s local debt to pave way for resuscitation of the Redcliff based steel giant, a Cabinet Minister has said. Zisco’s local debts are said to have ballooned to over $200 million from $72 million in 2010. Under the agreement with Essar Africa Holdings, which agreed to buy 54 percent of the state’s 90 percent stake in Zisco in 2010 in a deal worth $750 million, the government was required to settle 40 percent of the steel company’s local liabilities while Essar would pay the remainder.

“We’ve engaged Minister (of Finance and Economic Development) Chinamasa on the issue, obviously to find a solution (on the matter), but it’s not an issue delaying the reopening. A lot is happening,” Industry and Commerce Minister Mike Bimha said.

But a source at Essar said the Indian firm was “hesitant” because of potential litigation threats arising from the debt. The source said there was need for a “firm commitment” from the government that it will take over part of the local debt to allay the fears of potential lawsuits.

“It’s an issue that needs to be sorted,” said one source who requested anonymity. The debt has ballooned and who would want to start an establishment under huge obligations?

“Even Minister Bimha knows it, as he once rightly pointed out that no investor would want to commit funds into a company with huge debts. It does not make business sense.”

Minister Bimha said the government was committed to meeting all its obligations to ensure the deal materialises.
Under the agreement struck in 2010, Essar was supposed to take over the company’s foreign debt, which amounted to $300 million and to share the domestic debt with government, which totalled $72 million at the time the deal was struck, based on the equity structure. Minister Bimha said that the debt had ballooned to $200 million by February this year.

In May this year, Essar said it would invest $650 million over a two-year period to build a 500,000-tonne steel plant.
Essar Africa director Firdhose Coodvadia said the country’s current steel consumption was 100,000 tonnes per annum, which would see the remainder being exported.

He said Essar would raise steel production to one million tonnes in the second phase and it also intended to build a 300 megawatt power plant.
Coodvadia had not responded to questions sent to him last Friday by the time of going to print.