HomeLocalZisco needs US$200m to avoid collapse

Zisco needs US$200m to avoid collapse

Gift Phiri

FINANCIALLY beleaguered Zimbabwe Iron and Steel Company (Zisco) needs over US$200 million for recapitalisation before year-end to avoid collapse.

l, Helvetica, sans-serif”>The state enterprise’s management however says it is finalising plans to engage a strategic partner in a move aimed at pooling investment capital.

The Zimbabwe Independent understands the country’s sole iron and steel manufacturing firm urgently requires working capital to import spares, purchase wagons and coke oven batteries, and to maintain conveyors used to transfer coal and coke to blast furnaces.

It also needs funds to service its debts estimated at over $30 billion and to boost production levels, which have slumped to less than 20% of normal capacity.

In an exclusive interview with the Independent at the giant steelworks in Redcliff last week, Zisco managing director Gabriel Masanga, while admitting that there was need for massive recapitalisation, denied that Zisco was teetering on the brink of collapse. He said management was looking for a strategic partner to turn around the company’s fortunes.

He said the company was already in talks with potential suitors and was likely to move into a partnership “very soon”. An extraordinary general meeting held two weeks ago approved amendments to the company’s articles of association in line with the envisaged alliance, he said.

“The next step is to look for a strategic partner,” Masanga said. “There are a number of organisations interested in taking up equity in Zisco. We are just waiting for the major shareholder to decide which strategic partner it is comfortable to work with.”

Masanga declined to disclose names of foreign companies that could be engaged as external partners. An unnamed consultancy firm has been hired to audit the steelmaker ahead of the injection of fresh capital.

Industry sources said Johannesburg Securities Exchange-listed Iscor had expressed an interest in partnering Zisco. A Chinese firm, Shougang International Trade and Engineering Corporation, is also being touted as a prospective strategic partner. Previous government-brokered deals involving the two companies have been shrouded in secrecy. Masanga confirmed that Zisco had been working closely with the Chinese in the refurbishment of blast furnace number four.

He said the biggest constraint at Zisco was raw materials, mainly coal and electricity, which were in short supply because the company had not been able to pay suppliers. He said support infrastructure to the plant needed either replacement or repairs.

He said he was optimistic the company would soon get its regular supplies of important raw materials and would be able to save itself from bankruptcy to become one of the country’s major foreign currency earners.

“From the investment of the new equity partner we think that we can turn around the company for the good,” Masanga said. “We don’t want to continue going to our majority shareholder, the government, asking for cash injections. We want to use our returns to retire our debts and also post good profits.”

Zisco has a potential to export products worth US$105 million per year when operating at full capacity. The company, one of Africa’s biggest integrated steelworks, has been a perennial loss-making entity for the past decade, exerting huge pressures on the fiscus. Because of its strategic importance, the government has been sceptical about opening it up to foreign investors. But its persistent failure to make profits has forced the state into a major policy shift.

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