Global Steel agrees $400 mln Zimbabwe steel deal

HARARE, March 1 (Reuters) India's Global Steel Holdings said on Wednesday it would invest 0 million to rehabilitate Zimbabwe's ailing government-owned iron and steel works in a deal expected to boost output by more than 17 times.

The state-owned Zimbabwe and Steel Company (Ziscosteel), a key foreign currency earner before independence in 1980, has been plagued for more than a decade by a lack of capital to re-equip its plant.

''Ziscosteel has entered into a management contract with Global Steel Holdings Limited (GSHL) ... whereby GSHL would inject foreign currency for rehabilitation of Ziscosteel plant components,'' Zimbabwe central bank Governor Gideon Gono told a briefing attended by the Zimbabwe government and Global Steel officials in Harare.

The deal gives Global Steel a 20-year management contract for the plant, which will remain government-owned. The agreement marks one of the biggest foreign investments seen in recent years in Zimbabwe, which is struggling in the sixth year of a deep economic and political crisis.

President Robert Mugabe's government has previously identified Ziscosteel among underperforming state companies to be privatised under a plan to revive the southern African country's ailing economy.

Ziscosteel was the main foreign currency earner prior to independence from Britain in 198O, but output has fallen sharply to just 78,000 tonnes of steel per annum because its main furnace -- which accounts for 70 percent of its production -- has been derelict for years.

Gono said the deal with Global Steel would see output leap to 1.1 million to 1.4 million tonnes within 12-18 months.

REUTERS SRS PM2309