Mumbai: Two months after the $17 billion (around Rs 83,980 crore today) steel-to-shipping Essar Group signed a pact with the government of Zimbabwe to revive the ailing Zimbabwe Iron and Steel Co. (Zisco), the deal has been caught in the country’s politics, raising questions on its timely completion.
In early August, the Essar Group and Zimbabwe’s government announced the launch of NewZim Steel Pvt. Ltd and NewZim Minerals Pvt. Ltd to revive Zisco, committing a $850 million investment by Essar Africa with a promise of job creation.
Internal politics: Zimbabwe President Robert Mugabe. Photo: Andrew Burton/AP
It also committed to revive the plant to its original capacity and spelt out a long-term vision to double capacity to 2.5 million tonnes per annum.
It had also said that NewZim Minerals would undertake exploration and technology assessment, and a testing programme will entail in the first 18 months. After this, depending on the outcome, it will construct a large-scale beneficiation project and related infrastructure with an estimated $3.5 billion expenditure.
Beneficiation is a process in which low-grade iron ore is upgraded to higher iron content through concentration and elimination of impurities.
However, since then, voices within the coalition government that shares power in Zimbabwe have questioned the basis of the deal, even as the strife-torn nation’s President has called for a general election in early 2012.
Zimbabwe’s mines minister Obert Mpofu, who belongs to the Zimbabwe African National Union—Patriotic Front (Zanu-PF) party, has said that the deal was likely to be delayed.
“Essar has just approached us for the transfer of Buchwa Iron Mining Co. (Bimco) shares. However, the time taken for the transfer will depend on the procedures to be followed and these cannot be rushed,” Mpofu was cited in Zimbabwean daily Independent.
It further quoted Mpofu as saying that these delays should have been factored in when the deal was penned in early August, “but it is unfortunate that we were not involved in the deal from the onset”.
The procedures involved proper legal transfer and registration of new shareholder certificates with the Deeds and Registration office, the report said.
Bimco is the mining arm of Zisco and owns and operates several iron ore mines and limestone quarries.
However, Essar resident director for the Middle East and Africa, Firdhose Coovadia, is confident that the deal would be completed over the next fortnight.
“We’re still confident of closing it, as I said the minister has said (last week) two to three weeks and we still think two to three weeks (time) holds. We were at the mines ministry a few times this week, their procedures were largely complete and we stick by what I tell you in terms of time,” Coovadia said.
The country’s industry and commerce minister, Welshman Ncube, was cited in the same report as saying that the Essar transaction is becoming a victim of power struggles and political expediency.
“Every minister involved wants to be credited for completing the most lucrative deal in the country in the last decade. They would not want other parties to be credited for securing deals that help in reconstructing the country following a decade of economic decline,” Ncube said.
Ncube is part of the Mutambara faction of the Movement for Democratic Change (MDC-M), which split from the original Movement for Democratic Change, which was headed by current prime minister Morgan Tsvangirai.
The MDC shares an uneasy alliance with the Zanu-PF in the current coalition government.
Zimbabwe’s 87-year-old President Robert Mugabe, the leader of the Zanu-PF party, has been at the helm for three decades, but was forced to share power with political opponent Tsvangirai since the 2008 elections.
As no candidate received an outright majority in the first round of elections, a second round was called, but Tsvangirai withdrew his candidature a week before the deciding round, citing violence against his party’s supporters.
Amid sustained international pressure, South African President Thabo Mbeki brokered a power-sharing agreement with an arrangement, the so-called Global Political Agreement, for Mugabe to remain president while Tsvangirai was made the prime minister. The next election was originally due in 2013, but Mugabe said the government he was forced into two years ago with his rival, Tsvangirai, has run its course.
Essar Africa Holdings Ltd, a group company incorporated in Mauritius, emerged as the preferred bidder for Zisco and the iron ore resources that it owned beating the world’s largest steel maker by capacity, ArcelorMittal, and the Naveen Jindal-headed Jindal Steel and Power Ltd.