THE long-stalled Essar deal in which the Indian company signed a US$750 million takeover of the defunct Ziscosteel looks set to be finally implemented after a delegation from the firm met President Robert Mugabe last week to thrash out the shareholding structure that had been a major sticking point.Report by Brian Chitemba
The deal was first signed in August 2011 giving Essar 54% control of the new company NewZim Steel, while government had 40%, minority shareholders 6%.
As part of the deal, Essar was also awarded 80% ownership of NewZim Minerals, formerly Buchwa Iron Mining Company, with government holding the remaining 20%, but the Indian firm could not start operations after government moved to reverse its decision on the grounds that the value of its iron ore claims, which some allege is US$30 billion, should be verified first.
As the impasse unfolded, government again shifted the goalposts and demanded that the deal be restructured in line with the controversial indigenisation policy.
Government wants Essar to reduce its stake in NewZim Minerals to 49%, notwithstanding the fact that the company had assumed Ziscosteel’s debt of over US$340 million and spent a further US$12 million paying salaries to more than 3 500 workers it inherited.
Government wants its shareholding in NewZim Minerals increased from 20% to 51%.
Essar suspended workers’ salaries in May to press government to finalise the agreement. The deadlock seems to have been broken after Essar’s representatives met Mugabe, who then instructed Industry and Commerce minister Welshman Ncube to table the latest agreement in cabinet.
Ncube said he would have tabled the report for discussion on Tuesday but cabinet did not sit because Mugabe is away at the Non-Aligned Movement summit in Iran. Cabinet does not sit in Mugabe’s absence.
“Operations are likely to resume at NewZim Steel following a series of meetings with the Essar delegation last week,” said Ncube. “Contents of the agreement between the government and Essar will be announced after cabinet deliberation.”
Prime Minister Morgan Tsvangirai told journalists this week that the Essar project has to proceed and the debate over mining concessions should now be a thing of the past.
He said cabinet had made a decision and the inclusive government partners expect operations at the new steel manufacturer to start.
“After two years, we must thank Essar for being patient with us,” said Tsvangirai.