A forensic audit at moribund Ziscosteel (pictured) is underway to ascertain the losses suffered by the state enterprise in the wake of the cancellation of the US$255 million recapitalisation deal with ZimCoke, the Zimbabwe Independent can report.
The massive losses incurred by defunct Ziscosteel, estimated to be running into millions of dollars, arose from the systematic combination of asset stripping, mismanagement and vandalism of the company’s infrastructure during a near two-decade hiatus.
This month, the government reversed the multi-million-dollar revival deal, three years after ZimCoke snapped up Ziscosteel’s coke-making assets ranging from the plant and machinery, land, buildings, wagons and related coal handling implements. The deal, which was seen as key towards recapitalising Africa’s once largest integrated steelmaker, was cancelled because it was not favourable to Ziscosteel’s interests.
Under the deal, ZimCoke committed to inherit US$255 million owed by Ziscosteel to a Germany Bank in exchange for the state enterprise’s assets.
In yet another long-drawn-out transaction, which ended up being terminated, government in 2015 reversed the US$750 million Ziscosteel revival deal with Essar Holdings of India. The Indian conglomerate had acquired a 54% stake in the embattled steelmaker which used to boast a 5 000-workforce during the peak of its operations.
A similar deal with another Indian company, Global Steel Holdings, also failed to materialise.
Ziscosteel chief executive Farai Karonga this week told the Independent that the forensic audit, which will be undertaken during the last quarter of this year, would be used to determine the massive capital outlay required to resuscitate the insolvent company.
“The short and long (of it) is that we are carrying out a forensic audit within this quarter to quantify and ascertain the losses.
“We are now seized with an asset inventory management system that will assist us to start the bankable feasibility study. This will inform the Zisco information memorandum that will give investors a term sheet,” Karonga said, highlighting that security at the plant was being bolstered to curb asset stripping.
The systemic asset stripping, which was largely orchestrated by syndicates, is characterised by “theft of copper cables and metal scrap as well as vandalism of some metal structures”. Furnace slag and scrap metal were disposed of following a board resolution.
Ziscosteel chairperson Engineer Martin Manhuwa said management was also working towards determining the quantum of resources required to bring back the firm, though an assessment done in 2018 put the investment capital outlay at US$1 billion following negotiations with an interested Chinese suitor.
However, he said there was “no asset stripping” at the entity, which needs a massive capital injection for retooling and acquiring machinery.
To curb asset stripping, Manhuwa said, the entity had enlisted the services of the Central Intelligence Organisation (CIO), among other state security agencies in a bid to stop the entity from haemorrhaging further.
He said: “Zisco has increased co-operation between itself and national security agencies namely, ZRP and CIO.
“At the same time, Zisco has embarked on a process to increase security personnel as well as appropriately equipping them.”
With iron ore reserves estimated around 53,9 million tonnes, Ziscosteel’s turnaround strategy, which has suffered a still birth on a number of occasions, is pivoted around “promoting technological advancement and innovation and establishing a marketing organ for engineering, iron and steel products”, among other key result areas.
Industry and Commerce minister Sekai Nzenza, who also chairs the inter-ministerial taskforce set up to spearhead the company’s revival, said she expects work at the company’s Redcliff factory to resume soon.
“The president has given us the mandate to revive the steel industry and promote local production. We will revive Ziscosteel and deliver,” she said. “In order to do so, we will work with investors and follow a transparent due diligence process and we will commence operations very soon.”
At its peak, Ziscosteel contributed significantly in export receipts while it used to produce one million tonnes of steel annually. But decades of mismanagement, corruption and rampant vandalism militated against the firm, which closed operations in 2008.
Under the Ziscosteel revival plans, government is courting investors with the financial muscle to transform the insolvent company into a multi-billion-dollar spinning entity.
In 2019, government retired the steelmaker’s board that had been in office for more than a decade. At that time, Midlands Provincial Affairs minister Larry Mavima described the rampant asset stripping at the entity as “cannibalism”.
Subsequently, a new board was put in place in June this year, with the primary responsibility of spearheading the revival of the company, which supported downstream steel processing industries.
The company, which over the years has been surviving through selling scrap metal, is saddled with a gargantuan debt stock, part of which government started servicing to various creditors.