The $750 million Zisco-Essar deal has failed to take off 18 months after it was inked due to bureaucratic inertia and political bickering that has taken its toll on Zimbabwe’s efforts to attract foreign investors.
Sources close to the developments said Essar Africa Holdings, majority shareholders in the steel giant, are considering pulling out following the failure by the government to surrender large iron ore deposits in Mwanesi.
The claims should be surrendered to New Zim Minerals, a company supplying stockfeeds to the steel plant.
But this arrangement could soon be overturned after the Mines and Mining Development ministry raised concerns over the validation of the large mineral deposits.
Repeated efforts to get comment from Essar were in vain as the company had not responded to questions emailed last Thursday.
Parliamentary Portfolio committee on Mines and Energy chairman Chindori Chininga had also not yet responded to questions sent by this newspaper on whether Essar had approached Parliament over the issue.
But the sources said failure by the company to approach the government after concerns were raised over the ownership structure of mineral deposits of Mwanesi Range, the country’s largest known single iron ore resource, indicated that the Indian investors were frustrated.
“Essar showed interest in these claims at the very beginning of their investigations in Zimbabwe and told the Prime Minister’s Office at the time, that if they did not get Zisco they would build a green-field steel plant to exploit that iron ore,” said a source close to the developments.
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“It has taken 18 months for Essar to admit that they are not interested in Zisco unless they get the Mwanesi iron ore.”
Mines minister Obert Mpofu last month told legislators that the ownership structure of iron ore claims would be reviewed amid a push by the government to align the $750 million acquisition of the defunct Ziscosteel with the indigenisation and empowerment regulations.
The total iron ore deposits of the area, according to records, were estimated in a government bulletin of 1962 to be in excess of 30 billion tonnes of low grade, but potentially beneficial iron ore.
Essar owns 80% of New Zim Minerals, an associate of newly-formed New Zim Steel, which feeds into the steel plant, while the government has the remaining 20%.
The country’s empowerment laws compel foreign-owned firms to dispose of 51% to locals.
Mpofu also vowed to block a planned decision by Essar to construct a special pipeline to export the ore to Beira.
“Right now there is no resuscitation of Ziscosteel to show that they are concerned with the entity.
“They (Essar) are talking of things that are peripheral to the deal,” Mpofu said recently.
