Zicosteel hit by row over tenders.

Author:DHILWAYO, DOMINIC
 
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A confusing row over which company has been awarded the contract to rehabilitate Zimbabwe's steel company, Zicosteel, is threatening not only to hold up anticipated production but also to jeopardise future privatisation deals. DOMINIC DHILWAYO has the details.

A rehabilitation programme to revive the struggling Zimbabwean steelmaker, Ziscosteel has been jeopardised by revelations that the Ministry of Industry and Commerce has chosen German company Ferrostaal against the recommendations of government appointed consultants, at a cost of US$102m more than their selected candidate, Voest-Alpine Industrieanlagenbau (VAI) of Austria.

The revelation has caused severe disquiet in both government and Ziscosteel senior management, and there is now some confusion as to whether the contract will actually go ahead.

Industry minister, Mr Nathan Shamuyarira, publicly stated that Ferrostaal had been given the contract, but junior ministry officials maintain that it has yet to be awarded, and this is also the opinion of VAI who have not been notified of the government's choice.

Documents prepared by the consultants, Coopers and Lybrand, show that under VAI's recovery plan, at a cost of US$265m, Ziscosteel would eventually produce 800,000 tonnes per year of steel products, up from its current production of about 250,000 tonnes.

However, VAI declined to play a part in plans for Ziscosteel's eventual privatisation saying that equity participation was against company policy. It also suggested a US$180m cash injection into the company by the Zimbabwean government to improve the appalling state of its balance sheet. Coopers and Lybrand stated that VAI provided "a more complete solution" to the problems that plague Ziscosteel in terms of financial and economic restructuring and plant rehabilitation.

By comparison, Ferrostaal's bid of $367m would see the eventual production of 700,000 tonnes per year of steel products. The German company proposed dividing Ziscosteel into two companies: one consisting of the old but revamped steelmaking equipment and the other to be made up of new and revamped downstream operations in the form of rolling mills. It said it would take a...

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