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Essar Africa Holdings to Acquire Interest in ZISCO Assets

03/11/2011 - The Government of Zimbabwe and Essar Africa Holdings have reached an agreement for the revival of the operational assets of Zimbabwe Iron and Steel, with Essar Africa Holdings acquiring a significant interest in ZISCO’s steel operations  as well as its mining operations.

The Government of Zimbabwe and Essar Africa Holdings Limited, a privately held company of the Essar Group, have reached an agreement for the revival of the operational assets of Zimbabwe Iron and Steel Company (ZISCO).  The agreement marks an important milestone in the process which started with the public tender for a majority of the Zimbabwe Government’s shareholding in ZISCO and begins a new chapter for the economic growth of Zimbabwe.
 
Under the new agreement, Essar Africa Holdings and Government of Zimbabwe will set up two joint venture companies that will acquire all the steel and mining-related assets and liabilities of ZISCO and its subsidiaries. In addition, Essar Africa Holdings will further release Government of Zimbabwe from its guaranteed obligations under the ZISCO debt.
 
The new steel JV will be owned 60/40 by Essar and the Government of Zimbabwe and the minerals JV will be owned 80/20 by Essar and Government of Zimbabwe, respectively. 
 
ZISCO, an integrated steel company, has a rated capacity of one million tonnes for the manufacture of long products. The company has not operated for the last few years due to shortage of funds for working capital and maintenance of plant and equipment, irregular supply of power and other critical raw materials and infrastructure. ZISCO also owns  iron ore and limestone mining rights and other claims, which will require significant investment in exploration and development.
 
“We believe that the new ventures will be well positioned to be a low-cost steel producer that can meet the growing demands of the regional steel market and capitalize on the forecasted growth in sub Saharan Africa,” said Firdhose Coovadia, Resident Director, Essar (Middle East & Africa) and Director, Essar Africa Holdings. “We also recognize ZISCO as a vital and strategic asset for the Zimbabwean economy and Essar looks forward to making a meaningful contribution to the future development of Zimbabwe and its people.
 
“The revival of ZISCO represents a challenging task that will require the co-operation of various parties, and entail  significant capital expenditure,” continued Coovadia. “The Essar Group has the track record of successfully commissioning and operating greenfield and brownfield steel plants in different parts of the world including India, Canada, UK and Indonesia. The Essar Group will bring in investments and expertise in steelmaking, beneficiation, project management, construction, power generation and logistics.”
 
Recognized as a responsible corporate citizen across the countries and communities in which it operates, Essar supports a wide variety of Corporate Social Responsibility initiatives that help address community needs. The Group said it would endeavor to continue this trend in Zimbabwe to make a meaningful positive impact on the economic and social well-being of the people of Zimbabwe. The Group also noted that Essar Africa Holdings’ will strive to commit resources to socio-economic initiatives that include small and medium enterprise (SME) development, skills development, job creation and Corporate Social Responsibility activities in the areas of education, healthcare, sports and cottage industry development. Such initiatives will help accelerate industrial development, widen the base of growth and develop a new generation of entrepreneurs, particularly in the local communities in Redcliffe and KewKwe.
 
This transaction also represents an expansion of the Essar Group’s commitment to Africa and its people. Essar Group’s current operations in Africa include oil and gas assets in Nigeria, Kenya and Madagascar, telecom assets in East Africa, BPO operations in South Africa and coal concessions in Mozambique.
 
Closing of the transaction is subject to facilitation of various approvals, including approvals from the enabling ministries and an acceptable settlement of the Government of Zimbabwe guaranteed debt obligations of ZISCO. Upon closing, Essar Africa Holdings and Government of Zimbabwe will also finalize and settle liabilities such as unpaid wages and salaries and amounts due to various local creditors, etc.
 
The Essar Group is a multinational conglomerate and a leading player in the sectors of Steel, Oil & Gas, Power, Communications, Shipping Ports & Logistics, Projects and Minerals. In the steel business, Essar is a leading global producer on track to operating 14 million tonnes of annual steel capacity. The Group today employs 70,000 people across its operations in more than 20 countries in five continents. Essar Africa Holdings Limited is a private company incorporated in Mauritius.
 
The Group continues to expand its global footprint, focusing on markets in Asia, Africa, Europe, the Americas and Australia. Essar invests significantly in the latest technology to drive forward and backward integration in its businesses, and on leveraging synergies between these businesses. It also focuses on in-house research and innovation to be a low-cost manufacturer with high quality products and innovative customer offerings.