US$300m for Zisco revamp

THE Zimbabwe Iron and Steel Company (Zisco) will receive a provisional US$300 million for immediate initial resuscitation from the new investor, Kuvimba Mining House, with additional capital of up to US$1 billion set to be injected in the next three years.

Zisco board chair, Engineer Martin Manuhwa said this yesterday following a meeting at the company premises with Industry and Commerce Minister, Dr Sekai Nzenza.

Eng Manuhwa said the revival of the strategic giant steel producer, was certain this time around.

This follows the Government's selection of Kuvimba as the lead investor to drive the resuscitation of the firm, which is expected to play a critical role in the transformation of the country's economy.

Kuvimba has since established a select project team, which is already on the ground led by a special projects manager and is currently undertaking a due diligence exercise before the negotiating and signing of a memorandum of understanding in the next month or so.

Eng Manuhwa said Zisco subsidiaries and mining activities are expected to play a role in raising some of the capital going forward, especially given that Kuvimba is investing largely in human capital to strengthen Zisco's balance sheet as a starter.

"We are receiving an initial US$300 million from Kuvimba as provisional capital, something that we will use. After a feasibility study currently underway, we will use new technology to blend with what we already have on the ground. This will enable us to immediately resuscitate the company," said Eng Manuhwa.

"The initial capital discussion is around the immediate resuscitation issues, but then we want to grow in the three years organically as Zisco, the special purpose vehicle, the contractor and the investor as well. We will build towards about US$1 billion that we will raise organically through subsidiaries and mining activities amongst other strategies."

He said Zisco will start by selling improved iron products, which will eventually lead to the resuscitation of the steel plant. Eng Manuhwa said Kuvimba was not taking any equity within Zisco as what was being required by some potential investors.

"Kuvimba does not take any equity in the deal, it has a sunset clause, which allows us to deal for three years before we engage in discussion to do with an exit plan," he explained.

"By then we hope the Zisco balance sheet will be strong enough to rebuild the steel plant and we will go back to our former glory."

Zisco group chief executive Dr Farai Karonga said on the ground Zisco and Kuvimba had appointed technical teams that are carrying out due diligence operations, adding smoke is expected to start coming out at Zisco in the next 12 months, if all goes according to plan.

"The special project team set up by the investor is already on the ground carrying out due diligence and feasibility studies. On our part we have also set up a management team including managers of BIMCO and Lancashire Steel and also financial, legal, technical and transactional experts from outside," he said.

"We are expecting that in the next 12 months or even before, something will be coming out of this plant."

Commenting, Minister Nzenza said the resuscitation was crucial not only to Kwekwe, but Zimbabwe as whole as it will reduce the import bill of steel products and create employment.

"There was a lot of scepticism on the re-opening of Ziscosteel, given the journey Zisco has travelled as well as the number of potential investors that were interested in the company," she said.

"The resuscitation of Zisco is on top of the second republic's priorities as it is in line with reducing the import bill, value addition and employment creation."

Dr Nzenza said Zimbabwe has vast mineral resources that could be harnessed profitably through adoption of modern technology for extraction and value addition.

"Equipment at Ziscosteel is not outrightly obsolete and if the investor comes in with new technology and we blend with what we have, we will get Zimbabwe up and running again," she said.

The minister said Kuvimba was chosen after a rigorous adjudication process.

"We wanted an investor who also shares the vision of where the country is going. Unlike what some circles are saying, Kuvimba has the capacity to resuscitate Zisco given their track record in reviving companies across the country," she said.

"The idea is that we start with local content, we start with what we have before we go on to look for technology from outside, which is what we do not have in the country.

"Kuvimba, through its synergies, is going to bring in state-of-the-art equipment that will be used to extract and process a vast resource that we have in the country."

In line with climate change adaptation approaches, Dr Nzenza said Zisco's operations will this time around be modelled along laid down green energy policies.

Kuvimba will partner Zisco for three years under a management contract with an option of extending the contract or exiting the deal, among other options.