ED freezes Zisco, Zimcoke deal

TINASHE MAKICHI

President Emmerson Mnangagwa has frozen the proposed takeover of Ziscosteel assets by Zimcoke pending the finalisation of the entry by a Chinese investor in the State-owned steel maker.

Zimcoke was shoo-in to acquire Zisco assets for US$225m in a transaction that would have left Zisco as a shell -making it unattractive for potential investors – 12 years after it stopped operations.

Information gathered by Business Times showed that the Cabinet Committee on Ziscosteel revival headed by Minister of Industry and Commerce Sekai Nzenza raised questions on how the resolution on the deal was passed.

The Zimcoke deal fronted by former Bulawayo legislator Eddie Cross has been subject to scrutiny amid claims politicians were pulling the strings behind the scene.

ZimCoke intended to acquire some of Ziscosteel’s assets, which include 328 hectares of land worth US$16m, plant and machinery valued at US$168m, railway wagons and related infrastructure (US$4m), a 48% shareholding in ZimChem (US$23m) and a waste products plant (US$16m).

The investment vehicle also launched an estimated US$25m bid for Hwange Colliery Company Limited’s underground mine known as 3-Main as it angles to venture into the iron and steel business full throttle.

Cross told Business Times that President Mnangagwa has since directed the Zimbabwe Development Agency (ZIDA) to look into ways in which Ziscosteel can be revived.

This puts on hold the Zimcoke deal while waiting for the finalisation of an investment proposal by the Chinese investor-who has promised to revive Zisco with the first phase resulting in US$1bn injection into the steel project.

“The Zimcoke deal was done by the previous Zisco steel board. The cancellation is not even being considered.

President Mnangagwa has since instructed ZIDA to look at how Zisco steel can be revived.

Therefore, as part of the plan of looking at the proposals from the new investor, the Zimcoke deal has been put on hold at the moment,” Cross said.

Nzenza could not be reached for comment. ZIDA chief executive, Douglas Munatsi said the agency was receiving proposals which it naturally should.

“We are entertaining interests. As you know the Ministry of Industry, the Board and new management are seized with the turnaround of Zisco.

So ZIDA’s process is parallel but complementary to the Cabinet process which is being spearheaded by Minister Nzenza,” Munatsi said.

Well-placed sources to the developments told this publication that several bigwigs in government have been clashing over the deal.

Part of those involved includes directors at the Ministry of Industry and Commerce together with some officials at the Office of the President and Cabinet.

The controversial transaction has been marred by accusations with the new Ziscosteel board claiming to be a wellorchestrated asset stripping.

With its furnaces having capacity to produce up to one million tonnes annually, the company was among Zimbabwe’s major foreign currency earners.

The current deal which has since been put on hold required ZimCoke to assume the US$225m debt owed to German bank KfW GBMH.

The agreement was signed in July 2017, but due to delayscaused by the valuation of assets, and that the company had to deal with two different governments, it was re-activated in July last year.

However, soon after its appointment, the new Ziscosteel board directed management to analyse the ZimCoke deal and its impact on the resuscitation of the company.

A decision was then taken to terminate the deal on the basis that it made the revival of Ziscosteel impossible since some of its major assets would become inaccessible.

The board cited gross violation of the Public Entities and Corporate Governance Act since the previous board led by Nyasha Makuvise was not involved.

The former board chair signed exoneration letters, confirming they were not involved in the deal.

The board also claimed that asset valuations were not properly done. Cabinet was advised that in its original form, the deal would make the revival of Ziscosteel as an integrated steelworks impossible.

A decision was made to review the deal, but the board stuck to its earlier position after it was realised that the debt, which the ZimCoke purported to have taken over, was still on Ziscosteel’s books. Zisco has struggled to attract investors due to government bungling.

It has attracted investors such as Chinese firm R & F, Indian steel giant Essar Africa Holdings and a fly-by-night company, Global Steel Holdings Limited which left in a huff in 2006 after it had been unmasked.

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