Zimpapers Logo

Minister Bimha

Acting Business Editor
THE government has not been able to settle the Zisco (Now New Zimsteel) $72 million domestic debt that has now accumulated to $200 million because the then Finance Minister Tendai Biti could not release the funding, a Cabinet Minister said yesterday.In 2011, the government and Essar Holdings signed a $750 million deal to revive operations at the Redcliff-based steel manufacturing company.

Under the arrangement, Essar Holdings, a conglomerate from India, acquired 54 percent of Zisco and as part of the deal it was agreed that the new investor would assume the steel producer’s foreign debt that amounted to the tune of $300 million as well as rehabilitating the steel plant.

At the time of signing of the agreement, Zisco’s domestic liability stood at $72 million and as part of the agreement government was required to pay 40 percent of the debt while Essar funds 60 percent.

“At the time of signing the agreement, Zisco had a foreign debt of $300 million and a domestic liability amounting to $72 million. Zisco owed money to its workers, pension fund and the local authority. Part of the agreement was that Essar would take over the foreign debt and the $72 million domestic debt would be paid as 60 percent by Essar and 40 percent by government. But the Minister of Finance (Tendai Biti) at that time did not release the funding as you might be aware that there was a lot of political bickering in government.

“As a result, that debt has now ballooned to $200 million,” said Industry and Commerce Minister Mike Bimha during the Confederation of Zimbabwe Industries regional review of the ZimAsset in Bulawayo.

He said following the coming in of a new government last year, remarkable progress has so far been made with regards to operationalising New Zimsteel.
“No company will want to start operations with a liability of $200 million and what we have been doing in the past two weeks as government is that we have agreed on how we will address the $200 million domestic liability.

“When the new government came in, between September and December last year, it has done significant progress which in the past three years was difficult to achieve to ensure revival of operations at New Zimsteel because of the political bickering in the inclusive government. We have issued a special grant to Essar and together with the Zimbabwe Mining Development (ZMDC), they can do exploration work; we have also given Essar certain claims of iron ore in Buchwa and Redcliff,” said Minister Bimha assuring the country that in the next few weeks they would come up with a road map to sign the closure of the $750 million deal.

He said government and Essar were prepared to put to finality the deal to pave way for the resumption of operations at Redcliff.
“One thing that has to be known is that when we say the closure of the deal has been done, it is not like the company will resume operations tomorrow. For example, there is a lot of rehabilitation to take place at the plant; new coke oven batteries are required and rehabilitation of the blast furnace,” he said.

It is hoped that the implementation of the Essar deal would go a long way in promoting economic growth in the country in line with the objectives of the government new five-year economic blue print, ZimAsset, which is premised on propelling economic growth from 3,4 percent in 2013 to 7,3 percent by December 2013 during the plan’s period.

Before the closure of steel production operations at Redcliff in 2008, the firm was strategic to the country’s economy employing more than 4,000 workers and at its peak, producing about 1 million tonnes of steel per year for the domestic and foreign markets.

Essar has announced plans to increase production at New Zimsteel to 14 million tonnes a year.