149 companies file for liquidation, expert call for rescue fund

via 149 companies file for liquidation, expert call for rescue fund | The Source December 6, 2013

At least 149 companies filed for liquidation at the High Court in 2012 after failing to keep up with high operational costs, a local think tank said on Friday, and more are seen going under in 2013 as economic conditions worsen.

Companies are battling with high financing costs, with banks charging as much as 20 percent interest and the Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU) said most of those that applied for liquidation were on the basis that they could not pay their debts.

Labour costs in Zimbabwe are among the highest in Southern Africa while the electricity costs remain prohibitive and most companies are stuck with aged machinery that is expensive to maintain.

The number of companies seeking liquidation has progressively increased since dollarisation in 2009.  In 2010, 50 companies, almost five times more than the prior year applied for liquidation. The number increased to 73  in 2011 and more than doubled in 2012 to 149.

The number could be higher in 2013 as the economy is stuttering in the aftermath of a disputed July 31 election that extended President Robert Mugabe’s 33-year rule and a cash squeeze that has reduced consumer demand.

Cecil Madondo of Tudor House Consultants who has managed 25 companies in nearly two decades, said most companies were placed under judicial management or liquidation due to gross mismanagement, lack of effective corporate governance structures and high level of indebtedness.

“You find a company technically insolvent sometimes with more liabilities than assets regardless of its viability,” he said.

He said undercapitalisation was a major challenge facing most companies under judicial management resulting in them failing to buy basic material required to revive them.

“The major problem we face as judicial managers is lack of access to capital in order to address these problems,” he said.

Another judicial manager, Reggie Saruchera of Grant Thornton said the empowerment law   requiring foreign owned companies to be 51 percent owned by local blacks was making it difficult for potential investors to put their money in distressed companies.

“There must be a difference on how the company is being bailed out,” he said.

He called for a legislation that forces shareholders of distressed companies to relinquish power for the benefit of creditors.

“They don’t want to relinquish shareholding, they don’t have money to put into the business and at the same time the depositors and creditors are suffering, where do we draw the line?” he said.

He also complained about the country’s labour laws which were not favourable to employers making it difficult for a judicial manager to retrench where necessary in order to revive a company.

 

COMMENTS

WORDPRESS: 5
  • comment-avatar

    Yea, that’s the way ZANU does it. They just screw the businesses, because PF has no idea how an economy actually works. They have no idea how to grow a mango, let alone an economy.

  • comment-avatar
    maisokwazo 7 years ago

    Zimbabwe’s recovery from economic chaos and quagmire is a far fetched dream. Dream that the economy shall one day thrive under this regime, dream about jobs and dream about Zimbabwe returning to economic and political sanity and normalcy and prosperity with these bigots in power and at the helm of ineptitude incompetency and zealotry corruption and at the reigns of chaos is but and will remain a dream.

  • comment-avatar

    That corrupt Cecil madondo is a zanupf zealots. He looted our family trust and was protected by fraud squad. We are patient. He stripes distressed companies for his zanu cronies. Just another arias gwardzimbwa opportunist

  • comment-avatar
    Boss MyAss 7 years ago

    SO FAR SO MESS

  • comment-avatar

    Saruchera leave the labour laws alone. Who taught u that retrenchment is always the solution when yu guys know that most of liquidations are a result of lack of corporate governance. Yu want to take us to slavery where u hire anf fire willy nilly. Sorry yo the workers will fight back and th gvt will b removed from power