Zisco’s latest suitor’s rare trifecta

Zisco’s latest suitor’s rare trifecta
Zisco collapsed under the weigt of mismanagement, debt and undercapitalisation.

Zisco collapsed under the weight of mismanagement, debt and undercapitalisation.

CHINESE billionaire Zhang Li, Ziscosteel’s latest suitor, might possess the rare trifecta needed to succeed where many before him have failed.
A verifiable builder, miner and politician, Zhang will need to deploy all these skills, often simultaneously, if he is to avoid joining the scrapheap of investors who touched Zisco and turned into pillars of rust.
Building skills, because, in the words of none other than President Robert Mugabe at a ceremony to mark the doomed Zisco-Essar deal in 2011, the steelworks is shattered and needs a complete overhaul.
Mining skills, because Zisco’s iron ore and limestone mines are integral to its revival plans. As are coal supplies from Hwange.
Zhang is quite familiar with coal.
Although better known for his vast construction and real estate business, Guangzhou R & F, which he co-founded with Sze Lim Li in 1994, Zhang also set up a coal-mining company, Kinetic Mines and Energy Limited. Like the property entity, the mining company is also listed in Hong Kong.
As an executive director and chairman of Kinetic Mines and Energy, which he founded in 2006, Zhang takes direct responsibility for the company’s overall business strategy and the identification of potential acquisition targets.
That he holds executive positions, concurrently, at two listed entities in different asset classes, while holding a seat in the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), is nothing short of remarkable.
While not as powerful as it was between 1949 and 1954, when it was China’s de facto legislature, a role ceded to the National People’s Congress, the CPPCC does have some influence, serving as an advisory legislative upper chamber of parliament.
In Zimbabwe, that carries a lot of clout and sets Zhang apart from Global Steel and Essar, Zisco’s unsuccessful knights with huge political chinks in their armour.
Capital controls
Why Zimbabwe and why now?
The answer, possibly, lies in capital controls. China’s, not Zimbabwe’s.
After an estimated $1 trillion in capital outflows left China since 2014, Beijing imposed controls which turned the tap off almost overnight. In terms of the measures, China’s non fungible currency, the yuan, could only be converted for approved purchases.
Each Chinese citizen is allowed to convert up to $50 000 per year, per person. The $50 000 limit remains, but, since January 2, 2017, banks are now required to report transfers greater than $29 000.
Exchanging currency is now prohibited for buying bonds, insurance products and real estate.
With a well earned reputation as one of China’s most aggressive foreign property investors, with assets in the UK and Australia, Guangzhou R & F has been vocal in its criticism of the capital controls.
Early this year, Zhang told Chinese media that the capital controls had put Guangzhou R & F’s plans to acquire a chrome mine in Angola and an agriculture programme in Cambodia in jeopardy.
One belt, one road
Zhang urged the Chinese authorities to make exceptions for “big and good overseas projects”, especially those aligning with President Xi Xinping’s “One Belt, One Road” initiative. The concept, which has since evolved to the Belt and Road Initiative (BRI), provides the framework of co-operation between the Asian giant and its economic partners. It seeks to reconfigure China’s role in global affairs, using trade and infrastructure development.
Undeterred by Silk Road maps which place Zimbabwe outside the BRI loop, the southern African country does not shy away from staking a claim on the grand initiative.
“Zimbabwe stands to gain to the extent that we, the Zimbabweans, identify our core interests and core competencies, strengths which we then deploy in our interface with other parties in the context of the BRI,” Zimbabwe’s ambassador to Beijing, Paul Chikawa told The Sunday Mail in June.
“China’s Vice Foreign Minister responsible for Africa, Zhang Min, has just been to Zimbabwe where he held high-level engagements on boosting our bilateral ties based on the interface of our two presidents. Records will show that this vice minister, Beijing’s point person on African matters, has visited us on a number of occasions in the recent past.”
He added: “I leave it to any fair-minded person to deduce what this means in terms of the state of Harare-Beijing relations, and the potential therein. It is also noteworthy that our two Presidents met on January 9, 2017, and this was the fourth time in three consecutive years they were meeting.”
Zimbabweans, weary after years of being spun in a cycle of euphoria and anti-climaxes, have greeted the latest news of Zisco’s imminent revival with understandable skepticism.
The ZANU-PF government is given to grandiose claims of economic progress, typically slapping billion-dollar price tags on projects.
Since it regained full control of government in 2013, ZANU-PF has gone into overdrive, hyping up even the most basic memorandum of understanding as a ‘mega deal.’
This aggressive tubthumping has not only bred cynicism among the populace, but has also had the effect of undermining real progress made in terms of some the deals.
Some important agreements signed with China under the guidance of President Robert Mugabe and his counterpart Xi have seen some significant progress.
These include the $355 million Kariba power plant upgrade, which will add 300 megawatts on completion this December and the new $150 million Victoria Falls airport which is proving to be a boon for tourism.
State telecommunications firms, Net One and Tel One, have also received a combined $300 million in Chinese loans for their network upgrade and broadband projects.
The $144 million Harare water rehabilitation project, to upgrade the capital city’s water supply capacity from 520 megalitres to 620 megalitres, has made some progress but is more than a year behind schedule, due to problems between government and the Chinese financier.
Falling short of the mythical billion dollar ‘mega deal’ threshold, these projects have drowned in the inevitable skepticism bred by inflated expectations.
With the collapse of the $750 million Essar deal to resuscitate Zisco still fresh on the national consciousness, news of a $1 billion deal with Guanghou R & F was greeted with a more than healthy dose of skepticism.
‘It’s different’
But Industry Minister Mike Bimha, who has been negotiating with Zhang and his team for more than six months, insists Zisco will not be jilted at the altar.
“This time around, it’s different,” Bimha told reporters at State House on Monday, following Zhang’s meeting with Mugabe.
“The entire government is supportive of this project. The President is fully behind this project, therefore, in terms of commitment, there is 100 percent commitment from government to make it succeed.”
Bimha said Guangzhou R & F, whose engineers and due diligence teams visited Zimbabwe over the past six months, have ascertained that only between 15 percent and 20 percent of the entity can be salvaged.
“There are still a number of engineers coming in different groups to look at the plant, but we believe that in the next 18 months, we will be able to see the production of a million tonnes of steel,” Bimha said.
Once one of Africa’s biggest steelworks, with capacity to produce a million tonnes of steel annually, Zisco collapsed under the weight of mismanagement, debt and undercapitalisation. At its peak, Zisco employed about 6 000 workers directly, while indirectly creating an estimated 50 000 jobs. It was the largest foreign currency earner in the manufacturing sector.
Zisco’s mooted revival follows the recent award, to a consortium of non-resident Zimbabwean investors and its technical partner Transnet of South Africa, of a $400 million contract for the recapitalisation of the National Railways of Zimbabwe (NRZ).
The two entities are hugely dependent on each other, with Zisco relying on NRZ to move coal, iron and limestone, which will boost the rail company’s freight business.

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