A Chinese company has offered $3-billion for a 60% stake in Zimbabwe’s struggling state-owned steel firm, according to a report in the government-run Herald newspaper on Monday.
Zimbabwe’s Ambassador to China, Christopher Mutsvangwa, was quoted in the paper saying the Metallurgical Corporation of China (MCC) had put in an offer for shares in troubled Zimbabwe Iron and Steel Company (Ziscosteel) and was waiting for a response from Harare.
The move would be Beijing’s biggest investment yet in the crisis-hit Southern African country.
”MCC applied for a 60% stake in Ziscosteel after a meeting which was held between MCC officials and our government,” Mutsvangwa was quoted as saying.
Analysts were cautious on the report, however, saying President Robert Mugabe’s government has a history of announcing or signing pacts with foreigners which never take off or crumble within months.
Mutsvangwa said he was expecting Harare to approve the deal and the Herald quoted an MCC spokesperson, Song Guanghui, confirming the bid, saying: ”We are ready for the move.”
Mugabe’s government is battling to keep Ziscosteel — which is operating at around 30% of capacity and which critics say has been looted by top state officials — from collapsing after years of mismanagement.
”If [the] government approves the deal, which I think it will, Zisco will regain its status as the biggest steel manufacturer in Africa south of the Sahara,” Mutsvangwa said.
Ziscosteel was the country’s main foreign currency earner before independence from Britain in 1980, but output has sharply fallen to just 78Ã‚Â 000 tonnes of steel annually because its main furnace has been derelict for years.
Industry Minister Obert Mpofu, whose department is in charge of Ziscosteel, was not immediately available for comment.
Zimbabwe economic consultant John Robertson said the proposed Chinese deal would be a test of whether Mugabe’s government was ready to cede control of ”big, even largely non-operating parastatals” to foreign investors.
”We have seen a lot of these grand proposals on the table, the government has signed many such agreements, but for lack of commitment they have never got off the ground and the economy is suffering,” he said.
The proposed deal with China comes just two months after the government announced the collapse of a $400-million investment by India’s Global Steel Holdings to rehabilitate Ziscosteel. That agreement was signed early this year.
Mugabe’s relationship with China dates back to the 1970s when he co-led a guerrilla war against white minority rule in the former Rhodesia.
The ties have deepened as Western nations imposed sanctions on Mugabe’s top officials over allegations of vote-rigging and political repression. Harare frequently invokes China as one of its best allies on the world stage.
Critics say Mugabe has plunged Zimbabwe into disaster with policies that have led to an eight year recession and isolated his government from former Western donors, prompting it to scramble for aid from the East.
The crisis has left Zimbabwe with severe foreign currency shortages and the world’s highest inflation rate at more than 1Ã‚Â 000%, keeping the local dollar a pariah on international markets.
In June a Chinese company and two Zimbabwean firms signed deals worth $1,3-billion to establish coal mines and three thermal power stations in the country and Chinese companies have bid for rights to explore Zimbabwe’s uranium deposits.
Analysts say Zimbabwe’s platinum, nickel and copper deposits could all be of likely interest to Chinese companies.
China is already the largest buyer of Zimbabwe’s tobacco and has over the last few years delivered aircraft and buses to boost the country’s ageing fleets, while Mugabe has also bought jet fighters, arms and armoured trucks from Beijing. – Reuters