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First report of the Portfolio Committee on Industry and Commerce on the agreement signed between the Government of Zimbabwe and Essar Africa Holding Limited regarding New Zimbabwe Steel Limited
Parliament of Zimbabwe

September 10, 2012

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Introduction

The Portfolio Committee on Industry and Commerce conducted an inquiry into the Agreement signed between the Government and Essar Africa Holdings Limited (2011) regarding the Zimbabwe Iron and Steel Company (ZISCO), now New Zimbabwe Steel Limited. At its peak ZISCO produced one million tonnes of steel per annum and employed about four thousand people. Thus, concerned about the delay in the resumption of operations at this strategic entity in the revival of the country's economy, the Committee was compelled to conduct the inquiry.

Objectives

The objectives of the Committee's inquiry were as follows:

a) to find out what was stalling the conclusion of the Agreement

b) to have an appreciation of the provisions of the Agreement

c) to come up with recommendations for the commencement of operations at New Zimbabwe Steel Limited

Methodology

The Committee held oral evidence sessions with the following:

a) Ministry of Industry and Commerce

b) Essar Africa Holdings Limited

c) Ministry of Mines and Mining Development

d) New Zimbabwe Stee Workers' representatives

The Committee also considered the Agreement signed between the Government of Zimbabwe and Essar Africa Holdings Limited to create New Zimbabwe Steel Limited and New Zimbabwe Minerals.

Findings

Ministry of Industry and Commerce

The Committee received oral evidence from the Ministry of Industry and Commerce on the tender for ZISCO that has since been awarded to Essar Africa Holdings , on the 17th of March 2011 and found out the following:

  • The new bidding process for the tender of ZISCO culminated in the signing of an agreement between the Government of Zimbabwe and Essar Africa Holdings Limited of Mauritius in March 2011.
  • The Agreement provides for a shares ownership structure of 54: 35:11 percent for Essar Africa Holdings Limited, the Government of Zimbabwe and Minority shareholders respectively. In addition to that, Essar Africa Holdings Limited is required to inject an initial amount of $US 750 million in fresh capital towards the revival of ZISCO. Essar Africa Holdings Limited is going to take over the Government of Zimbabwe's ZISCO related (internal and external) debt obligations amounting to approximately $US 340 million.
  • The Minister of Industry and Commerce highlighted to the Committee that Essar Africa Holdings Limited had to finalise negotiations with relevant government ministries over enablers, such as water, electricity and a railway line before the conclusion of the Agreement.
  • The Committee was informed that the Government of Zimbabwe was set to benefit from the Agreement through the resumption of operations at the steel plant, which would provide raw materials for the local manufacturing industry. About three thousand jobs of the employees at ZISCO were to be saved and the benefits would cascade to the families of the employees. Furthermore, the outstanding ZISCO debt would be resolved. The Ministry also reported that Essar Africa Holdings Limited had pledged US$ 5 million towards the Small and Medium Enterprises Development Fund and another US$ 5 million towards the Women and Youths Fund.

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