The takeover of the Zimbabwe Iron and Steel Company (Ziscosteel) by a Chinese investor, Guangzhou R&FA, is standing on shaky ground following revelations that government is considering opening up the deal for other interested investors.
This comes as there is a deadlock with the Chinese investor over key issues that need reconsidering. The deadlock and possibility of deal failure come barely four years after another deal with India’s Essar collapsed in 2015.
Guangzhou R&FA last year reached an agreement with government on a US$1 billion to resuscitate Ziscosteel which has been battling for revival following its closure in 2008.
In an interview last week, Industry and Commerce Minister Mangaliso Ndlovu told Business Times that the execution of the Zisco deal by the Chinese investor had been delayed by issues that required polishing.
Ndlovu said there has been heightened interest on Ziscosteel from investors elsewhere but government would exhaust all possibilities with Guangzhou R&FA before engaging any new suitors for the steel company.
“On the Zisco Steel main, there were issues that we needed to polish up in the agreement and negotiations are ongoing. It is not a small issue that we are looking at here but I am happy with the progress so far.
“I cannot give timelines in terms of when we will agree on the implementation plan and other issues but that process has been delayed by the few outstanding issues that we felt needed to be reconsidered. There is heightened interest for Zisco but the principle we are upholding is that we need to exhaust all possibilities with the current investor before we can even think of talking to other investors,” said Ndlovu.
Zisco, once a major foreign currency earner, used to produce about one million tonnes of steel per year. In its quest of opening the industry to other players, the Government recently also granted Chinese stainless steel giant Tsingshan a special grant to iron ore mining rights in an area around Chivhu, Mashonaland East Province, to enable the company to set up a stainless steel manufacturing plant.
Government in April this year approved a $350 million investment deal in which ZimCoke (Pvt) Ltd was to revitalise the coke plant within Ziscosteel, creating more than 800 jobs .
Of the $350 million, $133 million will be capital injection, while $225 million will cover the debt owed by Ziscosteel to German bank, KFW. This deal gave ZimCoke full ownership of the coking plant.
At full tilt, the project is expected to produce 500 000 tonnes of coke annually, for both local use and export markets.
Ndlovu said Zimcoke will reach full production by April 2020 and by then it is hoped it would expected to cut the country’s imports of bitumen.
“That company has already started work at Zisco Steel and we expect full production around April next year. And out of that the produce will be exported mostly to South Africa. But by-products will go to ZimChem which is just adjacent to Zisco Steel. That’s where we will be able to get our Bitumen and other products which are going to be useful in our infrastructure development programmes,” said Ndlovu.