FORMER Industry and Commerce Minister Professor Welshman Ncube “misled” the Inclusive Government into signing the collapsed $750 million Essar Africa Holdings’ Ziscosteel deal without doing due diligence on the capacity of the investor, the Speaker of Parliament, Advocate Jacob Mudenda, has said.
Zisco ceased operations in 2008 due to choking financial constraints and its re-opening has had many false starts in the past four years. Under the $750 million deal, Essar was supposed to take over Zisco’s foreign debt, which amounted to $300 million and part of local liabilities.
The Government had to admit the collapse of the deal in November last year after the Indian firm developed cold feet four years after signing what promised to be an investment milestone.
During a debate on the state of the factory at the end of the ZNCC 2016 annual congress in Victoria Falls last Friday, Advocate Mudenda said due diligence was not done by then Minister of Industry and Commerce (Prof Ncube) on the deal.
“By the time the Essar deal was being signed some of us knew that this company was broke in India. Coming up for this deal was a way of trying to raise money so that they are on the world map of steel businesses,” said Advocate Mudenda.
“But in India they (Essar) had collapsed already. So, how can you partner with an entity that has collapsed in its own backyard, that’s the question? So, the former minister responsible (Prof Ncube) misled the nation during the government of national unity.
“No proper due diligence had been done and there is no way Essar could raise the money to rescuscitate that project.”
Before its collapse, Zisco was the largest integrated steel works in Africa with a capacity to produce one million tonnes of the commodity annually.
While Prof Ncube could not be reached yesterday as both his mobile phone numbers were not reachable, his then deputy Mike Bimha, who now heads the same portfolio, concurred that resuscitating Ziscosteel required an investment partner who had capacity and commitment to take over the huge debt for the parastatal, both foreign and local.
He told delegates that the then Government settled for Essar, which had committed to bearing the debt burden and injecting new funding.
Bimha said despite continuous bickering during the inclusive government, particularly between the ministries of mines and industry, Essar investors had hope for big business in Zimbabwe as they looked at a long term strategy to “making Zimbabwe their stepping stone into Africa and the region”.
He said while the Zanu-PF government, after winning the 2013 polls, managed to clear the mining rights hurdle within two months, Essar cited falling commodity prices for failure to attract funding from their investment partners.
Advocate Mudenda said Ziscosteel, which used to employ close to 3,000 workers, does not need $750 million but could be revived using local funding through adopting a pro-active strategy.
“I want to submit to you that I have made my own investigations. Ziscosteel can be resuscitated with only $30 million locally without an external investor.
“It can be done without external people. Sometimes our problem is that we do not want to know the truth and that’s a shallow mentality,” he said.
“I am going to engage the Minister of Industry and Chinamasa (Finance Minister) as well and say this is what we need. We can do it locally quite easily and Zisco can be up and running and those workers will be back at work. Hwange Colliery used to supply up to five trains per week to Zisco, it can happen again.”
Advocate Mudenda suggested the formation of a task force committee that would facilitate the speedy revival of Zisco, which would impact positively on the economy.
“Have a strategic team there to revive Ziscosteel because without steel you cannot speak of industrialisation,” he said.
Bimha then revealed that the Government was in talks with different potential investors that could assist Zisco’s revival.
“We are in the process of entertaining other investors and finding what we can do to make this investment more attractive. One way suggested by the Minister of Finance is to see whether we can somehow clean the balance sheet of Zisco so that the investor who comes doesn’t have to come and carry this huge debt but comes to invest,” said Bimha.
“But these are issues that are under discussion and one hopes we should move very fast because we are not looking at Zisco but the entire steel making sector.”
He hinted that there was opportunity to get investors to come into production of stainless steel, which is another stage in the value chain.
“So I am sure we should try to and be able to finalise the Zisco issue as soon as possible,” he said.