The Zimbabwe Iron and Steel Company (Zisco) board has terminated controversial deal for the takeover of some of its assets by ZimCoke, a local company fronted by politician and former Member of Parliament Eddie Cross.
This was after the new board, led by economist Dr Gift Mugano, resolved that the ZimCoke deal, struck in 2017, impinged the revival of Zisco as an integrated steelworks.
Zisco stopped operations in 2008, plagued by a lack of capital to recapitalise its operations as well as mismanagement.
With its furnaces having the capacity to produce up to one million tonnes of steel per year, the company was among the country’s major foreign currency earners.
ZimCoke purportedly bought Zisco assets related to the production of coke and coke oven gas and various associated equipment and infrastructure under a debt/asset swap deal, which would have involved ZimCoke settling a debt owed to a German bank.
The transaction, valued at US$225 million was signed in July 2017, when Dr Mike Bimha was Industry and Commerce Minister. It was given final approval by Cabinet on May 4 this year and the transfer of the assets was signed a month later.
Some of the key assets that would have been taken over by ZimCoke include rail infrastructure, coal handling facilities, about 200 residential houses and gas storage facilities.
Acting chairman Mugano told Business Weekly in an interview that the board had since advised the authorities on the latest developments.
“The board’s position is that we terminated the deal and responsible authorities were advised,” he said.
“These include the Ministry of Industry and Commerce; the Minister Dr (Sekai) Nzenza and her permanent secretary, Dr (Mavis) Sibanda and the Office and the President and Cabinet as required by the Public Enterprise Corporate Governance Act.
“We submitted the document expressing the board’s reservations, which led to the termination of the deal. It is known that Zisco is an integrated plant whose operations are heavily inter-dependent. So if we look at assets that would have been taken by ZimCoke, it was going to be difficult to revive Zisco. Apart from that, no proper evaluation of assets was done and the deal violated some corporate governance fundamentals since we were advised that the board was not involved.”
Dr Nzenza said she had noted the concerns raised by the board and would consult.
“The board has raised concerns which I have noted. But I can’t say more at the moment. Once I have a full picture, I will consult my colleagues
particularly the Minister of Finance (and Economic Development) since they are aware of the contract. I will also have to visit the operations to have a better appreciation,” said Nzenza.
While no comment could be immediately obtained from Cross, he told Business Weekly recently that the deal was the first full privatisation of a State asset under policies adopted by the new administration in line with state enterprises reforms.
“The plant is completely derelict and has not operated for over 12 years,” said Cross. “Zisco itself remains heavily in debt and has also not functioned since 2008. It has no capacity to raise the funds to settle its own obligations or to rebuild the plant.
“The shareholders in ZimCoke are going to invest over US$500 million to get the coke plant back into operating condition. In addition, the company will have to invest in clean water supplies, power generation, the railways and Hwange Colliery.
“None of which are able at present to meet the needs of the plant. When this investment programme is complete, ZimCoke will be the largest industrial exporter from Zimbabwe.”
He said the rebuilding of the coke oven plant was the first stage of the long process of resuscitating Zisco.
“The plant cannot function without coke and ZimCoke will make the restart of steel making that much easier than if the project had not been initiated. Clearly, both companies will have to work closely together to achieve that and the directors are well aware of the obligations,” he said.
Recently, ZimCoke appointed a nine-member team comprising Dr Nicholas Ncube, former deputy governor of the RBZ, who will serve as chairman of the board, prominent lawyer Gerald Mlotshwa Derek Scott, Philemon Nhachi, Emma Fundira, Cross, Lillian Mbayiwa, Michael Moore and Valentine Mushayakarara.