After months of negotiations the government and Essar African Holdings-based in Mauritius but Indian-owned-have signed a contract for the sale of the state-owned Zimbabwe Iron and Steel Company (Zisco). Essar will take a 54% shareholding in Zisco, while the government will retain 35% and minority shareholders their existing 11% stake. Essar says it hopes to resume steel production by mid-2012. According to the industry minister, Welshman Ncube, Essar will take over the government's US$340m debt obligations to Zisco and will complete the re-lining of the blast furnaces and coke oven batteries, involving an investment of US$750m in the first year.

Zisco is the only fully fledged Sub-Saharan steel producer outside South Africa, but has long suffered operational problems, particularly following the collapse of a much-publicised US$400m investment by India's Global Steel Holdings (which prompted allegations of asset "looting" by ZANU-PF). Its plant at Kwekwe has an annual capacity of almost 1m tonnes of steel, but persistent problems with deliveries of coking coal, load-shedding and breakdowns at its blast furnaces mean that production has effectively halted. The government has been seeking a strategic partner for some time: in the wake of the failed Global Steel Holdings investment the authorities announced that the Metallurgical Corporation of China had offered US$3bn for a 60% stake in the company, although this investment failed to materialise. According to Mr Ncube, in due-diligence exercises most potential buyers valued Zisco at only US$45m-underscoring the extent of the deterioration. Certainly, substantial investment is going to be required. Essar Africa's vice-chairman, Ravi Ruia, said that his firm will have to put in place "coal, uninterrupted electricity supplies, transport and logistics" in order to re-open the steel mill. In a second phase, Essar will also rehabilitate the rail link between Zisco, based in the central town of Redcliff, and Hwange Colliery in western Zimbabwe.