Martin Kadzere Senior Business Reporter
GOVERNMENT is now working on a Bill that will see it taking over the debt owed by the Zimbabwe Iron and Steel Company while negotiations with “other potential investors” have commenced, Industry and Commerce Minister Mike Bimha has said.
Zisco, the State-owned integrated steel firm stopped operations about eight years ago after running into serious financial problems.
Efforts to revive the company, which
used to be one of country’s biggest employer and a major economic force, failed after the deal with Essar Africa, which had committed to inject $750 million into the company fell away mainly due to the bureaucracies around mining claims, huge debts and subdued global steel prices.
Government had agreed to sell 54 percent of its shareholding in Zisco and 80 percent of its equity in BIMCO, which holds the iron ore mineral rights, to Essar Africa.
The collapse of the deal with Essar Africa become the second major deal involving Zisco that ran into problems after another $400 million deal with Global Steel Holdings, also from India, failed under unclear circumstances in 2006. Zisco debt is estimated at $380 million.
“To take over the debt, necessary legislation is needed and the Ministry of Finance has started working on that,” said Minister Bimha in an interview.
“But as a ministry, we are carrying out an evaluation (of the company) to determine what we have. We have also started engaging other possible investors so that when we finish what were are doing, we will have people to talk to.”
Minister Bimha said assuming the debt would leave Zisco with a clean balance sheet, which will make the company attractive to investors.
He said apart from foreign and local debts, Essar Africa failed to raise money to implement the project after steel prices took a slump on the international markets.
Steel prices declined nearly 40 percent in 2014 and hit a decade low of $37 a tonne in December last year compared to the record high of $190 a tonne in February 2011.
To avoid further accumulation of debts from unproductive workers, the Government terminated contracts for Zisco employees on three months notice in December.
Finance and Economic Development Minister Patrick Chinamasa said the resuscitation of operations at Zisco will have upstream and downstream benefits to the economy, hence, the need for Government to secure an investor as soon as possible.
“Central to this will be the need to free the Zisco balance sheet of historical ‘baggage liabilities’, including an accumulation of new obligations with regards to wages that arise on account of workers that are not producing anything, and are actually sitting at home or pursuing other engagements,” said Minister Chinamasa in the 2016 Budget.
He said the Zisco issue should be finalised as “we have lost much time on this matter”.