FINANCE and Economic Development minister Patrick Chinamasa says taking over the Zimbabwe Iron and Steel Company Limited’s (Zisco’s) debt of $494,8 million will not add to the government’s debt.
BY TATIRA ZWINOIRA
In a second reading of the Zimbabwe Iron and Steel Company (Debt Assumption) Bill during a late sitting of Parliament on Wednesday evening, Chinamasa explained measures to stop Zisco’s debt weighing government down.
“It has been agreed with the Ministry of Industry, Commerce and Enterprise Development that in the long run, this debt assumption will not translate into an increase in government debt because, one, the current project structure is based on Zisco being compartmentalised into three main components,” he explained.
“The first part involves the new Chinese investor, who will invest in a new plant and equipment and operate the rest of the steel plant.
“The new plant, in addition to long products, will produce flat products and special steel.
“It is believed that this investment will exceed $1 billion and has tremendous potential benefits to the economy.
“The second part encompasses the coke oven batteries ancillary plant and equipment, which will be used to produce coke for exports by a local
“The proceeds from coke export will be used to pay off the Germany KFW debt amounting to $174 million.”
Chinamasa said this arrangement had already been concluded and when the Bill goes to the committee stage, he will ask for an amendment of the schedule of debts to reduce it by $170 million.
“Lastly, a separate company will be incorporated with ownership of mining claims and rights and any investor will equip and operate the mines for a fee payable to the new company,” he said.
“This fee will be used to pay the Chinese and local debts, which amount to $284 million.”
In spite of a few false starts, the government hopes it can resuscitate Zisco, but assuming its debt means public debt, already over $11 billion, could soar.
The government is pinning its hopes on resuscitating Zisco by restructuring its debt and cleaning its balance sheet, a condition precedent to the operationalisation of an agreement between Zimbabwe and a Chinese investor.
The third clause of the proposed Bill establishes the extent of the liabilities to be assumed by the government.
The debt Zisco accrued prior to January 1, 2017 will be taken over by the government and thereafter, Zisco will be responsible for its own operational costs and liabilities.
Legislator David Chapfika said he would submit a report from the Portfolio Committee on the Zisco Debt Assumption Bill today.