Zimbabwe identifies investors for ZISCO steel firm

HARARE – Zimbabwe is in talks with six foreign companies over buying its shares in the country's sole iron and steel works, where it expects steel output to reach one million tonnes a year, a government minister said on Tuesday.

The Zimbabwe Iron and Steel Company (Ziscosteel), a major foreign-currency earner before independence in 1980, stopped operations last year at the height of an economic crisis, plagued by a lack of capital to re-quip its plants.

The government holds about 70 percent in Ziscosteel — once the largest integrated steelworks in the region — and had previously not been keen to sell its shareholding.

However the country’s new coalition government, in power since February, sees the sell-off of state entities as part of necessary economic reforms.

Gabuza Joel Gabbuza, minister of state enterprises and parastatals, said six foreign steel producers had been identified by the government to bid for the shareholding, and had all completed due diligence on Ziscosteel.

A final bidder could be chosen by the end of this month.

"These are global players whom we identified to bid for Ziscosteel and our technical team is conducting due diligence on the companies from which we will choose a winner to take over government shareholding," Gabbuza said in an interview.

"We are expecting the process to be concluded very soon, even by the end of this month. The companies are from South Africa and as far as India, with some locals also teaming up with foreigners," he said without giving details.  

Gabuzza refused to give a possible value on the government’s stake.

The minister said work to reline two blast furnaces and other repairs at Ziscosteel was underway, with two-thirds of the required equipment already at the plant.

The two furnaces have capacity to produce between 750,000 and 1 million tonnes of steel

In 2006 Zimbabwe clinched a $400 million management deal with Indian steel maker Global Steel, raising hopes it was moving towards disposing of loss-making firms, but the deal collapsed within two months.

"I think because of our economic status it will not be good to renege on contracts for the sake of future investment," Gabbuza said.

Critics say most of Zimbabwe’s parastatals, or government-controlled companies, have been run down through mismanagement by political appointees, while President Robert Mugabe’s previous governments had been reluctant to sell loss-making companies.

Gabbuza said 16 companies had now been identified for privatisation, including the generation unit of state power utility Zesa, which has been struggling to produce enough electricity for the country.

Mugabe and long-time rival Morgan Tsvangirai, now prime minister, formed a coalition government in February this year after years of political and economic crisis, but the new administration is struggling to raise money, up to $10 billion, needed for full recovery.