WORKERS at troubled former steel giant Ziscosteel received only a fraction of their December 2014 salaries as the company struggles to generate revenue to meet its monthly costs, amid growing doubts over the Essar takeover, which was expected to restore it as one of Africa’s biggest steelworks, The Source has established.
Zimbabwe’s failure to consummate the Ziscosteel takeover four years after signing with Essar has raised serious questions about the government’s attitude to foreign investment.
Essar, the African unit of India’s Essar Group in November 2010 agreed to buy 54% in Ziscosteel in a deal worth $750 million, with the government keeping 36% and minority investors 10%.
But the reopening of the steelmaker, now called NewZim Steel, has been held up by squabbles between the partners over ownership of mineral claims and the company’s legacy debt.
Last May, Essar said it would build a new 500 000 tonne steel plant at Ziscosteel for $650 million in two years after the government agreed to transfer 80% of the rights to the conglomerate.
Under the original agreement Essar was supposed to inherit the company’s foreign debt which amounted to $300 million and to share the domestic debt, which amounted to $72 million based on the shareholding structure.
As of February last year, Ziscosteel’s arrears to its workers and domestic creditors had risen to $200 million after the state failed to meet its end of the deal.
The government claims it is still finalising implementation of the plan and has announced many false starts.
“There is nothing going on here, we are struggling. The situation is now even worse,” an official who declined to be named said on Tuesday.
Another source said the company was struggling to pay workers and settling utility bills with the little revenue being generated from the sale of slag, pool iron and pool steel not enough to meet recurrent expenditure.
“Workers were paid (13%) of their December salaries last year,” said the official, adding that at times it took the company between two to three months to pay workers.
The lowest paid employees at the steel firm which employs 1 800 people earn between $80 and $200 per month. Contacted for comment, the company’s group chief executive Alex Gowo declined to comment on the matter.
However, the official said the company’s income from sale of its sundry “fluctuated” and this made it difficult to make monthly payments, particularly wages.
One of its major customers is Sino Zimbabwe which buys slag.
A tonne of slag costs around $11 per tonne while pool iron sales for between $110 and $160 per tonne, according to the official.
“We are just fighting with our creditors every day,” the official said.
The company, which facilitates water and electricity supplies to the Redcliff community, has the burden to pay for maintenance and security costs to ensure service is maintained.
“Whether there is production or not at Zisco, security still has to be maintained for 24 hours for the water and electricity supplies that are channeled through Zisco,” the official said.
– The Source