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India-Zimbabwean steelmaker to resume operation after long dispute
Last Updated: 2014-05-10 07:47 | Xinhua
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An India-Zimbabwean steelmaker, mothballed for three years, will start producing 500,000 tons of liquid steel annually in the next two years after the plant's two major stakeholders resolved their disputes over mineral claim ownership, a cabinet minister said Friday.

Industry and Commerce Minister Mike Bimha told journalists that the second phase of the NewZim Steel revival would see the output to be increased to 1.2 million tons per annum after 2016. Rehabilitation and installation of plant is already underway at a cost of 650 million U.S. dollars, Bimha said.

NewZim Steel is a joint venture mainly between the Zimbabwean government and a regional subsidiary of India's Fortune 500 firm Essar Global. The joint venture was set up in 2011 but it has since failed to become operational.

Bimha said considerable time and effort has been spent in readjusting the revival process. In parallel, NewZim Minerals will work on exploration and development of an iron ore beneficiation project, while iron ore from two stations will be blended to improve the quality of feedstock to the steel plant, he added.

The reopening of the steelmaker, formerly Ziscosteel, had been held up by squabbles between the partners over ownership of mineral claims, which now the government eventually agreed to transfer 80 percent of the rights to Essar while keeping the remainder.

Once the largest integrated steel works in the region, Ziscosteel had shut down in 2008 due to alleged gross mismanagement and failure to upgrade equipment.

In 2011, Essar Africa acquired a 60 percent stake in the former state-owned steel giant in a record 750 million U.S. dollar deal.

Essar Africa was exempted from complying with the indigenization law that requires foreign businesses operating in the country to cede 51 percent share-holding to black Zimbabweans.

The exemption was an incentive to the Indian firm for agreeing to clear 350 million dollar external debts owed by the old company and assumed by NewZim Steel.

At its peak, Ziscosteel employed more than 5,000 people and produced thousands of tons of steel annually for domestic use and export. The steelmaker was also strategic because many downstream industries like construction and railway transportation heavily relied on steel production.

One such company is chemical producer Zimchem Refineries which lost 75 percent of its business due to the collapse of Ziscosteel.

Bimha said while revival work was underway, the government and Essar had also agreed to implement immediate interim measures that included relief to workers who had gone for more than 40 months without pay and injecting some funding into NewZim Steel.

The company owes workers 204 million U.S. dollars including salaries, pensions and medical aid. Agreement had also been reached to revive operations at subsidiary Lancashire Steel using imported feedstock over the next six months.

Zimbabwe's economic growth has slumbered to 3.4 percent in 2013 due to lack of foreign investment, weak global mineral prices, and unstable power supply. Factories were closed and hundreds of workers laid off. Economists fear the situation might further deteriorate in 2014 as no quick fixes were available for the government.

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