Essar ordered to hand over control to Zim parastatal

Posted by on Wednesday, July 11, 2012 in Indigenisation, Zimbabwe politics | 6 comments

The Zimbabwe government has ordered the African subsidiary of India’s Essar group to hand over 51% of its shares in Ziscosteel

By Alex Bell
11 July 2012

Zimbabwe’s government has ordered the African subsidiary of India’s Essar group to hand over 51% of its shares to a Zim parastatal, in what is being described as a ‘u-turn’ in the original deal to rescue Ziscosteel.

Essar has been told to enter into a joint venture agreement with the Zimbabwe Mining and Development Corporation (ZMDC) and hand over 51% of its shares as part of the ZANU PF led indigenisation drive.

Essar acquired a 60% stake in Ziscosteel in March last year, in a US$750 million deal that saw the once giant steel maker be re-branded as NewZim Steel. The arrangement was also reportedly made on the agreement that Essar was exempt from ZANU PF’s indigenisation plans, which require foreign owned firms in Zimbabwe to hand over more than half of their shares to Zimbabweans.

NewZim Steel was meant to usher in the rebirth of the steel sector in Zimbabwe, after Ziscosteel stopped production in 2009 over massive debts and a myriad of other problems.

But over the past year Essar’s plan for rejuvenating the steel sector through NewZim Steel has been stalled over an ongoing dispute with Zimbabwe’s government, in particular the Mines Ministry.

Last month Mines Minister Obert Mpofu argued in Parliament that the Indian firm should not be allowed to pay only US$700 million for resources that he said are worth over US$30 billion.

Economic analyst John Robertson told SW Radio Africa on Wednesday that the targeting of Essar for indigenisation purposes is surprising and disappointing, explaining that it could lead to Essar pulling out of the plan completely.

“Essar will lose control in this deal and I am sure they will be wondering if there is any clause left with this requirement. It will massively diminish their interest in carrying on with this arrangement,” Robertson said.

The analyst added that this deal is yet another warning to potential investors in Zimbabwe “that the government here cannot be trusted to keep its word.”

“It seems that the ZANU PF side of government in particular wants to sabotage anything that is successful economically,” Robertson said.

To contact this reporter email [email protected] or follow on Twitter @albell88

  • zimbo

    What did Essar expected? Did they think that they were any diferent from any other company? Hard lesson to learn at the cost of US$750 million.I know that Essar has pyed last november the salaris in arreias to zisco employes.Sad that once again ZANU-PF has proved that they can not be trusted

  • dumbu

    ZANU(PF) is after surbotaging anything before it is out of power so that people could think it was the good party. We need to be very careful with this out going thieves and murderous.

  • mondo

    you want people to invest in zim.

  • Anonymous

    I had a gut feeling the Zanu PF regime was going to send the Indian company on a wild goose chase. I warned my cousin in Dubai, who is South African that all their efforts will be in vain. How can anyone trust a regime that is filled with opportunists and thieves

  • Chimbi Manwa

    This stupid move by ZANU PF is the death knell of foreign investment in Zimbabwe. We are now on our own. With limited capital of our own, we won’t go far in terms of economic development. In fact it’s a massive step backwards.

  • murambatsvina

    What i don’t get is who first come with a figure of US 700 MILLION to buy zisco which is worth 30 Billion. The Minister concerned does not seem to have been consulted.

    If we do not allow competent and knowledgeable people to handle this matters, we are being ripped off by these foreign investors.
    It’s a shame the people in ZANU PF who does have a clue in these matters always want to take the lead thereby selling our wealthy for peanuts.