MANAGEMENT at iron and steel giant, Ziscosteel say they are in the dark about the takeover by India’s Essar Holdings and the company is selling scrap metal to remain afloat, Parliament heard on Tuesday.
Essar, the African unit of Essar Group in November, 2011 agreed to buy 54 percent in Ziscosteel in a deal worth $750 million, with the government keeping 36 percent and 10 percent to be owned by minority investors.
But the reopening of the steelmaker, renamed NewZim Steel, was held up by squabbles between the partners over ownership of mineral claims, which the government eventually agreed to transfer 80 percent of the rights to Essar while keeping the remainder.
On May 9, at a joint press conference, Essar and the government said they had resolved differences over mineral rights that stalled the project for nearly four years, and that the Indian firm would build a new 500,000 tonne steel plant at Ziscosteel for $650 million in two years.
However, Ziscosteel group chief executive, Alex Gowo told the parliamentary portfolio committee on industry and commerce that the company, which ceased operations five years ago, was yet to reopen and that Essar was nowhere in sight.
“Zisco is on its own at the moment. There is no other party on the ground. We are waiting to hear from our majority shareholder – the government of Zimbabwe and the strategic partner on the negotiations,” he said.
He said Essar and government officials had visited the plant earlier this year and indicated that “work would be starting soon on the ground and that a lot of contentious issues that had delayed the project by more than three years had now been resolved.”
“Of those promises Mr chairman, $300,000 was released to go towards school fees and $100,000 was released to go towards the medical aid scheme,” he said, adding that the money had been availed through a loan from CBZ Bank.
On the rehabilitation of the plant, Gowo said: “There is nothing like that at the moment going on.”
Pressed to comment on the status of the company’s takeover by Essar he said:
“We are in the dark. We are not privy to the agreement.”
“Each month that goes by without activity is a loss that is accumulating. It’s a sad state of affairs and we are not happy,” he said.
“It’s quite obvious to us that there are some hurdles. If it was a small matter, some activity could be going on while people are waiting to finalise the deal but nothing is happening.”
He said Essar had informed management that once it had signed a deal with the government, production would start within 24 months.
Gowo said Zisco was generating between $100,000 and $120,000 per month from the sale scrap metal and was struggling to pay utility bills, resulting in disconnection of power supplies at most parts of the plant. It was also failing to pump water to the Redcliff community which houses employees.
“While we are not managing to pay as we would have like to pay, we are making token payments to get water and electricity to certain parts,” he said.
Last week, the industry and commerce minister, Mike Bimha told the Confederation of Zimbabwe Industries annual conference that Essar was on course to build the new steel plant and that it will produce steel within two years.
“Essar reviewed the plant and said it would take them a period of not more than 24 months to see the first production of liquid steal. So they are working on a 24 months period,” he said.
Bimha said the company was looking to acquire a coal mine to supply a new power plant to be based in Hwange. The power unit would provide uninterrupted power to the new Ziscosteel plant.
He added that Essar had already acquired turbines to produce 300 megawatts, which would be raised to 600MW.