Govt blocks auction of CSC assets

via Govt blocks auction of CSC assets – Nehanda Radio 19 December 2014 by Shame Makoshori

The Ministry of Agriculture has blocked a planned auction of Cold Storage Company (CSC) assets in Marondera, thwarting efforts by workers to recover unpaid salaries, the Financial Gazette can report.

The move, two week ago, temporarily saved the beleaguered parastatal, with workers’ lawyer, Moses Nkomo, saying government has agreed to settle the money owed to the employees in terms of the judgment.

What it therefore means is that the workers could still pounce on the assets in the event that government fails to honour its commitment. Nkomo said government was given until to settle the outstanding salaries on behalf of CSC, which has failed to recover from a devastating crisis triggered by prolonged under-capitalisation. “We will proceed to execute if they don’t pay,” he said.

The workers had a judgement for US$356 649, over which they had engaged the Deputy Sherriff to attach CSC assets for auction. About US$360 000 in unsettled salaries has also accrued since 2012, confidential documents seen by this newspaper revealed. The attached assets included locomotives, lorries, cars and tractors.

The High Court instructed the Deputy Sheriff to auction the assets and pay the workers who have been condemned to abject poverty by non payment of salaries. They have been receiving about US$50 per month since 2009. “You are required and directed to attach and take into execution the movable goods of CSC,” the High Court instructed on August 19.

The Deputy Sherriff was intercepted by government officials who stopped the sale and said government would take care of the outstanding salary payments, workers said. CSC’s chief executive officer, Ngoni Chinogaramombe, however, denied that government had pledged to settle its obligations to the workers.

“The ministry did not undertake to pay the outstanding salaries. They only requested workers to bear with management until end of March 2015,” said Chinogaramombe. He said CSC, like most companies, had been negatively affected by the shrinking commercial national herd which he said could not sustain viable slaughter throughput.

“Unlike the other small to medium size players in the industry, CSC requires high slaughter volumes to operate viably. The company requires adequate funding which is not readily available,” he said. CSC also owes pension funds in excess of US$4,6 million for pension contributions it has not been remitting to pension houses on behalf of workers. The company, once one of the vibrant State-owned firms, has crumbled due largely to mismanagement.

It owes workers over US$715 000 in unpaid salaries since 2009, lawyers said. Confidential documents pointed to extensive mismanagement at the Marondera operation, which sparked fears of “embezzlement” and “plant cannibalisation”. And “adverse going concern indicators, persistent loses, negative working capital and operations below capacity” were escalating, the documents highlighted.

The Financial Gazette has previously reported CSC cannot account for US$4,6 million which was meant for pensions.
This week, we obtained fresh details of mismanagement in Marondera, indicating that “banking is not done as the branch literally operated from hand to mouth and used all collections before banking”.

“The security of the uninsured assets was greatly compromised by inadequately armed and aged security personnel armed with catapults, sticks and stones…their physical ability to pursue and neutralise any threat to the branch’s assets was doubtful.”

It added: “Endeavours to explore ways to resuscitate the branch in consultation with corporate (office) have not yielded tangible positive results. The configuration of the branch has since been out of synch with the recommended modern business structure which increases flexibility and responsiveness to changes in the business environment. The continued running of the branch exacerbates the precarious financial position.”

Internal auditors exposed a collapse of systems, with core operations grinding to a halt as revenue was now being “generated from hide sales, service slaughter, fees and tenants averaging US$6 000 per month.” CSC had a foreign loan on its balance sheet standing at US$21 million as at December 31, 2011.

“CSC operations were supported by revolving loan facilities, from both foreign and local financiers, which were readily available prior to 2001 when CSC was exporting beef to the EU market,” Chinogara said.

“Financiers then, were keen to support CSC due to the hard currency the company was generating from the export trade. After the Foot and Mouth disease outbreak of 2001, CSC lost its lucrative European Union market and, consequently, the financiers discontinued their support. The amount outstanding to Marondera employees is US$356 000 which was accrued over several years and even includes a substantial amount owed to former employees who were shed off through natural wastage and not replaced over the years,” he said.

CSC’s operating loss before interest and tax was US$3,4 million in 2011, from US$8,7 million in 2010, with its going concern status threatened by a US$11 million negative working capital position. The Financial Gazette