Mystery deal to revive long-dead steelworks
Chinese real estate firm with no experience in sector pledges $1bn to mill
HINESE firm R&F plans to invest $1 billion in Zimbabwe Iron and Steel (Zisco steel), in the latest attempt to revive the moribund steelmaker, once the largest integrated steelworks in the region, which shut in 2008.
Industry Minister Mike Bimha said steel output was expected to resume within 18 months once negotiations have been completed.
“We are looking at an initial injection of over $1bn and it will probably come to $2bn when we proceed. It’s not a small project, but a huge project and a lot of work is to be done,” Bimha told journalists at State House where R&F founder Zhang Li recently met President Robert Mugabe.
At Zisco, the furnaces have long gone cold and been silent and the red smoke no longer rises from its chimneys.
Mean baboons fight for food outside what used to be the HR department as if to remind us of the greed that destroyed what used to be one of the country’s biggest employers.
The decayed conveyor belt running across the road and up the hill doesn’t go anywhere any more.
With the rust-caked shell where wild animals and desperate scrap scavengers roam, talk of reviving
CZisco overnight can only be described as rhetoric. Zisco steel was once Africa’s biggest integrated steel maker. It folded operations in 2008 because of gross mismanagement and a failure by the state-owned firm to keep abreast with advancing technology, according to analysts.
The African unit of India’s Essar Group agreed to buy 54% in the steel maker in November 2011, in a deal worth $750m, but the deal collapsed in 2015 as a result of squabbles between the partners over ownership of mineral claims.
Bimha said nothing of the steelmaker’s debt overhang which haunted the Essar deal. Zisco steel’s foreign and local debt stood at $450m on March 31, 2014.
Details of the newest deal have not been made public but the scale of investment suggests R&F would have control of Zisco steel’s stock, making it Zimbabwe’s first stateowned company to be privatised.
Its revival would also provide a boon for another state-owned company, National Railways of Zimbabwe, as 60% of its business came from transporting coal to Zisco steel.
The steelmaker’s latest angel investor is one of China’s richest businessmen, Zhang Li, whose net worth is $3.3bn.
He heads the Guangzhou-based R&F property company.
R&F has been in the news recently – the company said it had teamed up with another Chinese firm, CC Land – to buy Nine Elms Square in London in a deal worth £470m ($624m).
It also recently bought 77 hotels from Wanda, another Chinese firm, as part of a $9bn deal.
R&F is listed on Hong Kong’s stock exchange and is often referred to as one of the “five South China tigers”. It has an estimated market value of $6.7bn. If the R&F’s deal goes through, it would be the largest single foreign investment into Zimbabwe’s troubled economy.
Analysts, however, are asking why a Chinese real estate company, with no traceable experience in metals or resources, is considering spending at least a $1bn on this 75-year old steel plant, or whatever is left of it.
“With such an established name in real estate, owning properties managed by top brands such as Hyatt Hotels, acquiring and running a rusty old steel plant in Zimbabwe seems rather out of step,” said Mguni Maenzanise, an economist.
Even as China tightens controls on how its companies invest abroad, R&F is branching out, outside its core business, and Zimbabwe may be one of its first experiments.
Even more uncertain is what exactly it is that the Chinese company would be buying – the steel mill alone or access to Zisco’s iron ore deposits?
On the surface, it is hard to see what R&F would have found attractive about the aged plant. By Bimha’s own admission this week, Zisco is now obsolete.
“Much of what is there at Zisco won’t be used and their engineers have proved that probably it is about 15 to 20% of what is there that they will be able to use. Much of it is no longer in a state to be used,” Bimha said.
R&F would have to build a new plant.
The previous interested investor, Essar Africa, had originally planned to spend $750 000 on a 1 millionton plant.
The company later announced it would instead build a 500 000 ton steel plant for $650m over a period of two years.
For such an established real estate group, owning a rusty old steel plant in Zim seems out of step
Chairman of China’s Wanda Group Wang Jianlin (R) talks with Chairman of R&F Properties Li Sze-lim (L) during the signing ceremony for the strategic partnership between Wanda Group, Sunac and R&F Properties Group in Beijing on July 19, 2017.