By Nelson Banya and Swati Pandey
Zimbabwe said on Tuesday it has chosen unit of India’s Essar Group to take majority control of troubled state-owned steel maker ZISCO in a deal that one source said was worth up to $500 million.
Zimbabwe’s deputy minister for industry and commerce Mike Bimha told reporters Essar Africa would buy a 54 percent stake in ZISCO, with the government keeping 36 percent and 10 percent owned by small private investors.
While Bimha did not provide financial details of the deal, a source with direct knowledge of the matter told Reuters the Indian company would pay roughly $450 million to $500 million for its stake. An Essar spokesman declined to comment.
ZISCO is the first privatisation under a power-sharing government formed last year by bitter rivals Robert Mugabe and Morgan Tsvangirai. The southern African nation is struggling to attract the $10 billion of foreign investment economists say is needed to right it after a decade of decline and hyperinflation.
Bimha said Essar should be on the ground before the end of the year and resume production “as soon as possible”. ZISCO has the capacity to produce 1 million tonnes of steel a year. Once a major foreign currency earner, ZISCO is now saddled with about $240 million in debt, which Essar will take over.
Bimha said Essar had been assigned “the the responsibility of comprehensively reviving the country’s steel giant”. Mugabe in May rejected shortlisted bids from the South African unit of ArcelorMittal and India’s Jindal Steel, saying the companies were too big and Zimbabwe preferred medium-sized investors.
Essar, a steel-to-shipping conglomerate, is controlled by brothers Shashi and Ravi Ruia, whose combined net worth is estimated at $15 billion, making them among the richest men in India. The company raised nearly $2 billion by listing its energy and power business in London earlier this year.
ZISCO stopped operations in 2008 at the height of Zimbabwe’s economic meltdown, weighed down by $300 million of debt. While the coalition has stabilised the economy, frequent wrangles and an empowerment law seeking to localise control of all foreign firms has discouraged many foreign investors.
However, the government has said ZISCO’s privatisation is excluded from the empowerment law, which compels foreign-owned firms including mines and banks eventually to sell an at least 51 percent shareholding to local blacks. (Reuters)
