Business Live reported that barely a month after the signing of a mega USD 750 million agreement between Zimbabwe and India's Essar Group investment one of the biggest in recent history controversy has erupted again with senior government officials and workers questioning the value and utility of the business deal.

Some in government are asking if Zimbabwe did not mortgage its massive iron ore resources in the deal.

The launch apparently began a new chapter in the economic recovery of Zimbabwe and the revival of mining towns of Redcliff and Chivhu, which were becoming ghost towns. However, documents about Essar seen by the Sunday Times show there are serious questions marks over the deal.

One of the documents said that "On the surface, buying a one million tonne steel plant in Ziscosteel seems a small acquisition for a big conglomerate like the Essar Group, but in reality the company has discovered a gold mine.

The real issue is not what government officials said that the issue is that Essar now has access to iron ore reserves of between 20 billion tonnes to and 25 billion tonnes which are enough to last its current steel capacity for a thousand years. With its steel capacity reaching 14 million tonnes per annum next year, Essar needs close to 23 million tonnes a year. It takes 1.6 tonnes of iron ore to make 1 tonnes of steel.

Documents said that although it appears Zimbabwe will gain a lot in the process, in the final analysis it is Essar that has far more to gain.

Government should establish a commission of inquiry into this issue to assess how and why such a project of strategic national interest could be sold for peanuts. What exactly transpired in this deal? There is more to it than meets the eye.

Indian steel giant Essar bought 54% of the state owned Zimbabwe Iron & Steel Company. The Zimbabwe government kept 36% while 10% remained with minority shareholders. The new company will be known as NewZim Steel. The deal also involves the formation of NewZim Minerals which will invest USD 3.5 billion in mining.

Government and Essar Africa Holdings Limited last month announced the launch of two entities, NewZim Steel and NewZim Minerals. This closed the transaction process which started in August last year with a public tender for a majority stake of the government shareholding in Ziscosteel.

(Sourced from www.businesslive.co.za)