eBusiness Weekly
Martin Kadzere
Old Mutual has been sucked in the controversial take-over of the Zimbabwe Iron and Steel Company assets by ZimCoke amid revelations the insurer has expressed interest to become equity partner in ZimCoke, Business Weekly can exclusively reveal.
ZimCoke, a local investment vehicle fronted by Bulawayo South legislator Eddie Cross, is locked in a vicious fight with ZICSO’s new board over the control of key assets of once Africa’s largest integrated steel manufacturer.
ZISCO stopped operations in 2008 due to lack of capital to fund operations. With its furnaces having capacity to produce up to one million tonnes annually, the company was among Zimbabwe’s major foreign currency earners.
However, ZimCoke intends to acquire some of ZISCO’s assets including 328 hectares of land worth US$16 million, plant and machinery valued at US$168 million, railway wagons and related infrastructure (US$4 million), 48 percent shareholding in Zimbabwe Chemicals (US$23 million) and waste products plant (US$16 million).
Reports say the valuation of assets was done by ZimCoke.
The deal entails ZimCoke assuming US$225 million debt owed to German bank KfW GBMH for the assets.
This week ZimCoke insiders told Business Weekly that Old Mutual, which intends to become a shareholder, was among financial institutions leading mobilisation of funding for refurbishment of the plant and associated infrastructure. People with knowledge of the matter said its equity in the company would be around US$140 million.
“Old Mutual and one of largest bank in South Africa (name supplied) will be mobilising facilities to bring the plant back to life. As for Old Mutual, it is interested to become a shareholder and talks are underway,” said one source that cannot be named.
Last week, managing director for Old Mutual Investment Group Marjorie Mayida, denied any talks with ZimCoke.
“Please note that Old Mutual has not engaged in any capital transaction with ZimCoke,” she told Business Weekly.
Coincidentally, Lillian Mbaiwa, the group marketing executive of Old Mutual was in December last year appointed on ZimCoke board chaired by former deputy governor of the Reserve Bank of Zimbabwe Nicholas Ncube.
The transaction has been marred with acquisitions and counter acquisitions, with ZISCO board led by economist Dr Gift Mugano, claiming it is “a typical case of asset stripping” while Cross blames the board for sabotage.
Some government officials have also described the deal, signed when Dr Mike Bimha was the minister as “very bad.”
Last year-after its appointment-the ZISCO board directed the management to analyse the ZimCoke deal and its impact on the resuscitation of the company. A decision was then taken to terminate the deal on the basis that it made the revival of ZISCO impossible since some of its major components would become inaccessible by the state company.
The Cabinet was advised about the deal that in its original form would impinge the revival of ZISCO as an integrated steelworks. A decision was made to review the deal but the board held on to its earlier position after it was realised that the debt, which the ZimCoke purported to have taken over was still in the books of ZISCO.
The board cited gross violation of Public Entities and Corporate Governance Act since the previous board led by Nyasha Makuvise, was not involved. In fact, the former board chairman signed exoneration letters, confirming they were not involved in the deal. The board also claims that valuations of assets were not properly done.
This week, Dr Mugano told Business Weekly that the board had written to the parent ministry of Industry and Commerce recommending termination of the deal. “The debt which ZimCoke purported to have taken over is still in our books and that has been confirmed by the Ministry of Finance and Economic Development,” said Dr Mugano. “So in the interest of protecting public assets, we found it proper to uphold our earlier resolution to cancel the transaction and we have since advised the Minister (Dr Sekai Nzenza) of such position.
In February, Finance Ministry secretary George Guvamatanga wrote to Ministry of Industry confirming that they had not received any communication from KfW agreeing to assume the ZISCO debt.
However, Cross, the former opposition politician said the debt assumption agreement had been finalised with KfW GBMH based in Germany, Frankfurt and would be signed by all parties when the transfer of title is effected.
Dr Nzenza said she was scheduled to meet Finance Minister Prof Mthuli Ncube yesterday to “jointly review what happened and to have a common understanding on way forward.” On the board’s recommendations, Dr Nzenza said “not only that I have noted their concerns, but I also have first hand information after meeting the management twice.”
