Zimcoke spokesperson Eddie Cross has reacted angrily to accusations by the Ziscosteel board that the firm is trying to railroad a deal that will disadvantage the once-thriving steel giant.
Cross (EC) told our acting news editor Everson Mushava (EM) that Zimcoke was poised to revive Zisco, which has been moribund for a number of years due to poor management and lack of investment.
Below are excerpts from the interview.
What is the status of the deal between ZimCoke and Ziscosteel given that you have had a small team working at Zimcoke for over a year now?
EC: Their main task has been to stop the continuous theft of assets from the site.
We have plant and equipment, scrap iron and cables.
In addition, they have cut grass and fire breaks to protect assets and conveyor belts from bush fires.
We have also sorted out all spares on-site and have started to prepare the site for the arrival of contractors.
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Offices have been renovated and we have had a succession of consultants on-site to look into what was needed to bring the plant back into production.
All working drawings have been located and estimates of costs prepared. This has cost us close to US$1 million.
In addition to the above, we have initiated discussions with banks and financial institutions on the needs for the company to undertake the rebuilding and all the investments required in support services, railways, water, electricity and coal.
Detailed discussions have been held on-site and at offices across the world, on how to approach the rebuild and all technical aspects.
This will be followed by the negotiation of contracts for the work that is required.
EM: Zisco board chairperson Gift Mugano said the deal should be revisited because there were no asset valuations.
What is your defence against allegations that it is an asset stripping deal?
EC: When this transaction was initiated in 2017 by the directors of ZimCoke, the Essar deal had just collapsed and they had withdrawn from the country after spending US$60 million negotiating with the Zimbabwean authorities.
No one else seemed interested in the resuscitation of the plant and even Essar would have built a new steel plant opposite the Zimcoke site.
The Ministry of Finance expressed interest as it would take over a third of the bilateral debt with Germany and result in a significant reduction in the national debt and the debts of Zisco Steel Limited, which stood at over US$600 million.
The minister of Industry agreed that the idea should be pursued and a Cabinet committee of four was set up under the chairmanship of the Finance minister.
Four ministries were involved, including Industry, Transport and Mines.
They agreed with the offer from ZimCoke and we decided to take over the Zisco liability to the German bank KfW in Frankfurt.
This stood at €168 million and was attracting interest at 6,7% per annum.
It currently stands at over US$200 million and will be US$380 million by the time it is expunged under the ZimCoke deal.
Ziscosteel board were instructed to negotiate the takeover of assets at Zisco related to this transaction and this was carried out in early 2017. The assets were valued at the time at US$225 million.
They included land, plant and machinery, infrastructure, railway wagons and the shares in Zimchem P/L, who are an integral part of the coke plant.
These valuations were mutually agreed and I am sure that the most recent (December 2019) valuation of these same assets by the Ministry of Local Government for rates purposes will confirm them as reasonable valuations — if not as an overvaluation of what the then minister of Finance called “junk”.
This plant was badly closed down and all but one of the four batteries has to be rebuilt.
Essar would not have done so — they planned to build their own coke plant at a new site.
This deal was approved in May 2017 and signed by both parties in July 2017. It then took us two years to negotiate the assumption of the KfW debt and the final transaction was then approved by the Cabinet in May 2019.
Transfer documents were signed in July. We are now waiting for a rates clearance certificate and a capital gains tax clearance certificate to be issued to take ownership of the site and then we can start work in earnest.
EM: Mugano says the Zisco assets are still on the Zisco books and the debt with the German bank has not yet been assumed. What is the position?
EC: The agreement of sale has been concluded and we are waiting for transfer of the site and assets — all the required work has been completed and this process should be complete in the next few weeks.
As far as KfW Bank is concerned, the agreements are concluded and are acceptable to the Ministry of Finance and the Attorney General and these can be signed at any time.
The debt has already been taken off the list of foreign liabilities in the Ministry of Finance.
In fact, the Ministry of Finance has agreed in the past fortnight to pay the capital gains tax on this transaction as Ziscosteel has no resources of its own.
This will be Z$10,2 million and is based on the ZimCoke valuations at 5% of the assets being transferred.
You will understand that until we actually take transfer of these assets, we cannot sign any agreement to take over the liabilities involved or to close with banks for the investments required.
We will be investing US$500 million in this project and I think it is very exciting.
There is no reason why the Zisco board cannot get the steel plant working if they can find the money.
We will gladly provide the coke they need at cost plus a margin as we originally agreed back in 2017.
