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Honour pledges made to foreign investors

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Failure by our government to put finality and closure to the $750 million Essar Africa’s revival of Ziscosteel exposes the dysfunctional character of the inclusive government and sends wrong signals to potential foreign investors.

The Essar deal — the largest foreign direct investment in the country in the past decade — has also exposed the power struggles at play in the government hindering the finalisation of the pact which has Cabinet and presidential approval.

As a result, Essar Africa cannot be blamed for threatening to pull out of the deal citing unnecessary and frustrating protracted disputes over the transfer of iron ore rights to the India-headquartered company.

The government and Essar Africa agreed that the Indian firm would purchase Ziscosteel’s refining plant and its iron ore mine claims estimated to have 40 billion tonnes in deposits. Essar Africa also got a special Cabinet clearance to secure a 54% stake in Zisco-steel, above the 49% limit for foreigners as outlined in the country’s empowerment laws.

Mineral rights from former Buchwa Mine Company (Bimco) and other claims have still not been transferred to Essar’s new local company, NewZim Minerals.

Sadly, it seems some elements in government are now reneging on the pact or are hesitant to honour part of their bargain by refusing to surrender the iron ore claims and are battling to revise the deal.
The major problem, in our view, was that so many ministries were allowed to get involved in the first place, creating a chaotic scenario now providing space to those who were opposed to the deal to strike.

The deal is being handled by a ministerial committee comprising the ministries of Mines, Finance, Economic Planning and Investment Promotion, Industry and Commerce, and Justice and Legal Affairs. Unfortunately, every minister on the committee wants to be credited for completing the pact. The deal has become a victim of power struggles and political expediency.

The transfer, according to media reports, has been dogged by questions of undervaluation of the resources and that some of the claims were registered and owned by private individuals who have now gone to court to protect their rights.

We are not convinced by the explanation given by the Director of Enterprise for Industry and Commerce, Stanislaus Mangoma, that the delay in transferring the iron ore claims was that the Mines ministry wanted to “verify the claims and it’s an elaborate process that involved mining commissioners”.

The question is: Why did government enter into a deal with Essar without resolving the issues that are creeping up now? Is it not business practice that a proper due diligence should have been done before signing on the dotted lines?

There is need for clarity on this issue and it should be concluded as a matter of urgency. As a country, we should honour our commitments and bargains if foreign investors are to take us seriously.

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