A COURT application is set to be filed any day from now to legally and officially cancel the US$225 million ZimCoke deal to acquire assets of the now defunct state-owned Zimbabwe Iron and Steel Company (Ziscosteel) after President Emmerson Mnangagwa’s adviser Eddie Cross and his son-in-law Gerald Mlotshwa’s transaction collapsed.
Top ministry of Industry and Commerce sources say a High Court application was supposed to be made this week by Zisco lawyers, but it is now likely to be filed next week to “close the ZimCoke chapter once and for all, and move on”.
The ZimCoke deal was signed in 2017, approved by cabinet but later cancelled by the Zisco board and government in 2020 amid accusations that it was not approved by the board and amounted to asset-stripping.
The new court application will pave way for the promised US$1.3 billion investment by another state-owned shadowy mining entity, Kuvimba Mining House, which got a vote of no confidence recently from South African platinum mining giant Impala Platinum Holdings, which owns Zimplats, over the hyped Darwendale platinum project.
Several lawyers who have given legal opinions, seen by The NewsHawks, on the Zisco-ZimCoke agreement say it is null and void as it was unprocedural, and the Cross and Mlotshwa entity did not fulfil its obligations to pay debts and get approval from the Zimbabwe Investment and Development Agency.
Zimbabwe’s plan to develop one of the world’s biggest platinum mines stalled after Impala demanded greater transparency on the ownership of Kuvimba before considering a joint venture.
However, Kuvimba failed the transparency, accountability and corporate governance test as it could not disclose some of its ultimate beneficial shareholders.
It is common cause that some of Kuvimba’s mining assets are those which were owned by local tycoon Kudakwashe Tagwirei – who is on British and American sanctions – through Sotic International. Tagwirei also owns Sakunda Holdings.
Impala, the third-largest producer of platinum group metals, was approached by Great Dyke Investments, which owns the Darwendale project, for a joint-venture, but Kuvimba failed to clarify its opaque shareholding.
Kuvimba and Russian tycoon Vitaliy Machitskiy’s Vi Holding each own 50% of Great Dyke.
Further, Kuvimba, which has not yet fully paid for Mazowe and Red Wing gold mines owned by Metallon Corporation despite claiming to have paid a dividend last year, is one in a series of companies in the past 15 years to come making noise about Zisco’s revival without much delivery.
Cross, a ZimCoke board member and shareholder, and Mlotshwa, lawyer and transaction adviser, tried but failed to push through their controversial steelworks deal. ZimCoke was chaired by Nicholas Ncube.
After a frustrating processes, Cross threw in the towel in September 2020. Mlotshwa persisted, but the deal was subsequently cancelled.
Sometime in 2017, Zisco entered into an agreement with ZimCoke to sells its assets for a nominal US$1 on condition that the latter would pay the former’s US$225 million debt to KfW Ipex-Bank Gmbh.
ZimCoke wanted to acquire Zisco’s coke batteries, coal handling facilities, railway wagons and shares in Zimchem (Pvt) Ltd.
Specifically, ZimCoke wanted 328 hectares of land worth US$16m, plant and machinery valued at US$168m, railway wagons and related infrastructure (US$4m), a 48% shareholding in ZimChem (US$23m) and a waste products plant (US$16m).
It also launched an estimated US$25m bid for Hwange Colliery Company’s underground mine, 3-Main.
The full inventory ZimCoke wanted entailed: coke batteries No. 1, 2, 3 and 4 together with by-products plant and all associated machinery and infrastructure; coal-handling facilities in their entirety inclusive of rail lines; conveyor from local coal handling plant to coke batteries; shares in ZimChem; gas holders; P&D offices (renamed The Revival Centre by Essar) with contents; coke plant offices and workshops inclusive of contents; roll design building and contents; coke and coke breeze storage areas; slag and skull dumps with land and contents; coke and coke rail wagons at Zisco and National Railways of Zimbabwe Dabuka, although Zisco would remain responsible of NRZ storage charges; houses and water rights at Kwekwe River among other aspects.
Despite that it stopped working in 2008, Zisco, 89% owned by the government and the remainder by private shareholders, retains huge residual value.
The company owns Buchwa Mining Company, Lancashire Steel, ZimChem and Frontier Steel.
It provided a lifeline to various companies in the value chain and industry, hence remains the biggest missing link in the Zimbabwean economy. The company used to produce mainly for the export market, earning the country millions in foreign currency.
Its linkages with ZimAlloys (for provision of ferrochrome), Hwange (for coking coal), NRZ (for transport) and Zesa ensured it was one of the economy’s locomotives.
Various companies that relied on Zisco for production purposes had to close, downsize, or switch to uncompetitive imports for survival. These include Sable Chemicals, ZimChem, Ripple Creek Mine, Zimasco, Steel Makers, Haggie Rand and ZimCast.
Zisco was founded in 1942 as Rhodesia Iron and Steel Commission, the largest integrated steel plant in Africa. By 1957, it was producing 257 166 tonnes of steel per year. At Independence in 1980, it was renamed Zisco and employed over 5 500 people, which peaked at 8 000.
But the company was later destroyed through extended periods of mismanagement, corruption and incompetence.
A 2006 audit report and media reports showed the company was looted by politicians, senior management and their cronies through controversial contracts parcelled out to conflicted parties, airfares, hotel bookings and food for politicians and extortionate directors’ fees, salaries and allowances.
By 2008, the company was now producing less than 12 500 tonnes which were way below the break-even point of 25 000 tonnes per year. Plant breakdown became very routine with a single blast furnace providing the lifeline.
Debts mounted and scaled US$340 million, even reaching US$500 million by some estimates, with the German bank owed US$240 million.
In 2006, Global Steel Holdings from India proposed to invest in Zisco, but the deal collapsed due to political interference and clashes over the funding model. In 2011, a US$750 million deal was struck with Essar Africa Holdings, also from India, to form New Zimbabwe Steel Company. Essar would assume 54% shareholding while the government retained a 36% stake and 10% remained in the hands of private investors.
However, the deal fell through in 2015 over iron ore deposits. A deal with a Chinese company Guangzhou R&F followed in 2017.
Other investors that expressed interest in Zisco in the past include ArcelorMittal, the world’s biggest steel-maker, Jindal Steel, China Metallurgical Group, Apollo Steel, Posco, Gateway Zimbabwe and Sovereignty Capital.
Then came ZimCoke and now Kuvimba, which are both associated with Mnangagwa’s cronies.
Kuvimba, which is opaque, has already failed an Impala transparency test, which raises questions as to how it will succeed at Zisco when it ignores basic corporate governance and transparency requirements.