Zisco-Essar deal — government should come clean


Since the Zisco-Essar deal was announced there have been conflicting reports regarding the actual status of the deal.

Essar Africa Holdings Ltd (EAHL) is reported to have committed an investment of approximately $750 million into, among other things, relieving Zisco of its liabilities. This, as reported, forms the basis of the Zisco-Essar deal.

Media reports further state two new entities would be created, NewZim Steel (Pvt) Ltd and NewZim Minerals (Pvt) Ltd (NZM). These, we are told, will be owned 40%-60% and 20%-80% by the government of Zimbabwe and EAHL respectively.

This transaction violates the indigenisation laws of the land, but with good reason, many Zimbabweans would not have bothered much as long as it furthered their interests in a transparent and beneficial manner.

Zimbabwe boasts of abundant mineral resources. It has the second largest reserves of platinum in the world. Equally, at an estimated 33 billion tonnes, Zimbabwe has arguably the largest iron ore reserves in the world.

The government has been progressive in private-public sector partnerships lately. We see the indigenisation of the diamond sector set to bring about $600 million into government coffers in 2012.

Similar initiatives in the mining of platinum and indeed localisation of the smelting will surely bring immense benefit to Zimbabweans.

Gone are the times when the International Monetary Fund and World Bank hood-winked resource-rich third-world countries into giving up their resources almost for nothing to developed countries under the false pretence of being progressive.

As such, every transaction of national importance involving mineral resources should be given proper and due consideration to ensure interests of Zimbabweans and future generations are safeguarded to avoid any potential prejudice.

The fact Zisco has been lying idle for a long time should never be used as an excuse to deprive Zimbabweans of their right to fair disposal of the underlying assets.

Three key aspects are very important about the deal. Firstly, the deal is the biggest disposal ever concluded by the State post independence.

Secondly, it was negotiated at a time when the government had full knowledge of various indigenisation initiatives underway in the mining sector.

Thirdly, Zisco assets are largely national assets that serve the very broad interests of Zimbabweans while being represented at the shareholding level by the State.

Given the above submissions, the disposal of any government shareholding in Zisco, more so a majority shareholding, should be systematic and transparent to ensure interests of all stakeholders are appropriately safeguarded.

Indeed there should be a deliberate effort by (Industry and Commerce) minister Welshman Ncube, to make public all key elements of the transaction so Zimbabweans can, with full information, adjudicate if indeed their interests have been safeguarded.

Common-sense says it is virtually impossible to get unanimous approval of the deal from all Zimbabweans and all the same, it would be unreasonable to call for a referendum on the same.

But nevertheless, a transparent framework of the bidding process and subsequent disposal of national assets should be made pubic at one point in time.

Zimbabweans need to be furnished with at least three independent valuation reports of the iron ore and limestone reserves that are owned by Zisco directly or otherwise at Ripple Creek, Mwanesi and Buchwa and other related mining claims. The disposal of any mining assets cannot be done without geological and valuation reports of the ore reserves.

What iron ore reserves are we talking about at Zisco? Does it need to be a secret to a few Cabinet ministers when the owners of the assets, Zimbabweans at large, who are the ultimate beneficiaries of the government shareholding in Zisco, are in the dark?

Of course without making the assumption that no drillings were done to ascertain the reserves during the transaction, it is very important that independent valuation reports of the Zisco mineral reserves and other assets be made public for Zimbabweans to understand the value being given up in Zisco in return for the cash injection and debt assumption by Essar.

That forms the basis upon which a conclusion can be reached on whether the deal was reasonable, fair and transparent.

From a casual analysis, Essar, with their massive experience in the steel business, definitely knew what they were buying into by assuming significant shareholding in NZM and splashing $750 million into the deal.

There are media reports that a 260km long slurry pipeline would be built from Chivhu to Mozambique to pump iron ore.

There is potential prejudice to Zimbabweans in terms of loss in value added tax, corporate tax and pay-as-you-earn running into hundreds of millions of dollars every year if this is allowed to be an integral part of the transaction.

Equally, the valuation of unprocessed ore is very subjective and there are potential loopholes that could allow transfer pricing, resulting in Zimbabwe potentially losing billions of dollars.

A number of columnists and ordinary Zimbabweans, through various media houses in Zimbabwe, have questioned the fairness of this deal, but unfortunately no official response has been given.

Of course it is not that persons appointed to public office respond to all concerns that are raised in the media, but surely concerns involving 33 billion tonnes of iron ore belonging to Zimbabweans deserve a formal response.