Indian conglomerate Essar Group announced on March 9 that its subsidiary Essar Africa Holdings Limited (Essar Africa) and the government of Zimbabwe have reached an agreement for the revival of the operational assets of Zimbabwe Iron and Steel Company (ZISCO).
As SteelOrbis previously reported, Essar Africa received official notification from the government of Zimbabwe of its selection as the preferred bidder for the revival of ZISCO.
According to the newly-inked agreement, Essar Africa and the government of Zimbabwe will set up two joint venture companies that shall acquire all the steel and mining related assets and liabilities of ZISCO and its subsidiaries, and Essar Africa will further release the government from its guaranteed obligations under ZISCO's debt. The steel joint venture will be owned 60/40, and the minerals joint venture will be owned 80/20 by Essar Africa and the government, respectively. The initial Essar investment will be $750 million and the company will take a 54 percent stake in ZISCO. The transaction will close in due course upon facilitation of various local approvals.
Production at low levels due to lack of capital
ZISCO is an integrated steel company with an annual capacity of one million mt engaged in manufacture of long products with operations in Redcliff and distribution centers in Bulawayo, Kwekwe and Harare. ZISCO derives raw material security through its subsidiary Buchwa Iron Mining Company (BIMCO) which owns and operates several iron ore mines and limestone quarries.
ZISCO has been operating at low capacity levels for the last several years due to shortage of working capital and funds for maintenance/modernization of plant and equipment. As part of its proposal, Essar will invest in the revival and expansion of ZISCO.
Firdhose Coovadia, resident director of Essar Middle East & Africa and director of Essar Africa, commented "We believe that the new ventures will be well positioned to be a low-cost steel producer that can meet the growing demands of the regional steel market and capitalize on the forecasted growth in sub-Saharan Africa. We also recognize ZISCO as a vital and strategic asset for the Zimbabwean economy and Essar looks forward to making a meaningful contribution to the future development of Zimbabwe and its people."