Cabinet has ordered Essar Africa Holdings to cede a 51 percent stake to the Zimbabwe Mining Development Corporation, ZMDC, in accordance with the nation’s controversial black empowerment law, further plunging the deal into a crisis.
According to Mines Minister Obert Mpofu, Essar which won a bid last year and invested $750 million to revive the moribund Zimbabwe Iron and Steel Company or ZiscoSteel, is expected to start drawing the necessary joint venture agreements.
Mpofu said the government is ready to transfer mining rights in Redcliff and Buchwa Mine to the company’s New Zimbabwe Steel Limited.
The government has delayed releasing iron ore reserves to the Indian firm claiming that the initial deal sealed with the Ministry of Industry and Commerce was flawed as it parceled out large quantities of natural resources to the foreign company.
Many political players in the country have criticized the deal saying it short-changed the country with deputy Prime Minister Arthur Mutambara recently saying the deal should have been worth at least $2 billion.
Zimbabwe currently holds a 40 percent stake in this firm after Essar won an international bid to take over ZiscoSteel assets and liabilities amounting to millions of dollars.
VOA Studio 7 could not reach Essar Group vice chairman Ravi Ruia who was said to be traveling. But Mpofu said cabinet has revisited the agreement to conform with the law.
New Zimbabwe Steel joint workers union chairman Benjamin Moyo said workers are failing to make ends meet while government ministers are fighting over the Essar deal.
Economist Briggs Bomba said Harare’s move is likely to scare away potential investors. “It is embarrassing that the government is failing to honor the deal,” said Bomba.