SAIL confirms steel deal with Lazarus Zim

Business Day reported earlier this week that the Zim investment vehicle Afripalm Resources had signed a deal with the Steel Authority of India


Friday, Feb25, 2011
By Business Day

The chairman of state-run Steel Authority of India Limited (SAIL), C.S. Verma, has confirmed his company is to conduct a feasibility study for a R21 billion plan, expected to produce 3-5 million tonnes of steel a year in South Africa.

That’s after Afripalm Chairman Lazarus Zim had said on Wednesday that Afripalm Resources had signed an understanding with the Steel.

Zim’s Afripalm Resources signed an understanding with the the Steel Authority of India.

In SA the bulk of steel is made by ArcelorMittal, formerly Iscor.

Also an Indian-run company, the Mittal group is the biggest privately owned steel maker in the word.

But its sojourn in SA has not always been a happy one. Mittal came to SA after it was promised that most of the iron-ore that feeds its furnaces would be available at cost plus 3%.

That promise was met, but the company has had persistent problems with the government, which accuses it of charging artificially high prices in the local market despite the cheap iron ore that had been arranged for it.

Then, two years ago, Arcelor-Mittal bungled and forgot to renew a mining right that guaranteed it the cheap ore.

This led to a slew of legal and political action (and whispered threats from the company that it might be forced to withdraw from SA) with, as yet, no final result.

All of that could now be made moot should Zim and his Indian investors go ahead with a plant of their own.

The steel investment would at least partly explain the many private meetings Jacob Zuma , Zim and members of the Gupta family had with Indian officials during Zuma’s state visit to India last year.

The meetings offended a wide range of business figures who were travelling with Zuma but felt excluded.

It also seems likely that the possibility of attracting this investment is one reason why the government has responded so severely to attempts by Kumba to secure for itself the iron-ore rights that ArcelorMittal lost, and to be able to sell the ore at market rates.

he government is opposing Kumba and wants the right given to a company called ICT in which the Gupta family has a strong but indirect interest.

It is hard to know to what extent Zim’s plan may rest on that ore being available at cost plus 3%.

With REUTERS