THE conclusion of talks between India’s Essar Africa Holdings and the government on the resuscitation of Ziscosteel, now known as New Zimsteel, could not have come at a better time for the ailing economy.
Talks between Essar and the government to conclude the mega deal have been going on since 2011 at the expense of thousands of workers that have gone for years without proper remuneration.
The collapse of Ziscosteel has also had a ripple effect on industry in Kwekwe, Gweru and Bulawayo. A few companies have delayed folding because of the lingering hope that the New Zimsteel furnaces would be back on stream soon.
That dream is now reality after the new investors announced on Friday that they would immediately build a 500 000 tonne steel plant at a cost of $650 million, which would be complete in two years’ time.
Such an investment is rare in Zimbabwe these days and it is likely to illuminate the economy. Essar in 2011 agreed to buy 54% of the government stake in Ziscosteel in a deal worth $750 million after years of mismanagement had weighed down the steel giant. The government is now a minority shareholder with 36 % of the shares and another 10% would be held by some other investors.
Essar has indicated that it would import new equipment, including a blast furnace and upgrade the existing plant at a cost of $750 million.
The company would also settle debts for both foreign and local creditors which stood at $450 million as of March.
Ziscosteel’s shutdown had crippled the municipalities of Redcliff and Kwekwe where most of the former steel giant’s workers stayed.
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The unpaid workers were no longer able to pay for municipal services and the local authorities were failing to recover debts owed by the company. Therefore, the reopening of the company would likely be celebrated more in Kwekwe and Redclif.
The government needs to take advantage of this deal to project Zimbabwe as a country that is still open for business. The country is in desperate need of such mega deals to reverse the collapse of the economy.
