300 companies liquidated – Sunday Mail

via 300 companies liquidated Sunday, 15 December 2013 Sunday Mail by Enacy Mapakame

A slowing local economy continues to weigh on local companies, with revelations that more than 283 companies have been liquidated since 2009, raising the spectre of further collapse if Government does not take measures to mend the economy.

In 2009, 11 companies filed for liquidation and the number increased to 50, 73 and 149 in 2010, 2011 and 2012 respectively.

Companies continue to battle capital deficits in an economy suffocating from liquidity constraints and low investor confidence. Speaking at a recent Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) workshop held in Harare, Pakistan business consultant and researcher Mr David Fitzpatrick warned that the situation might become worse if the current economic hardships persist.

“Many companies are facing economic distress,” said Mr Fitzpatrick.

He however noted that the country has a sound foundation to address the insolvency issues.

“The situation is much better than in many other countries. There are standard debt collection methods and times, respected judiciary with skilled lawyers,” he added.

It is a cause for concern that most companies that have gone under judicial management (which is supposed to be recuperative), have failed to recover.

In essence, judicial management is supposed to rescue a struggling company and make it viable again. Tudor House Consultants managing director Dr Cecil Madondo, who has been appointed judical manager for 25 companies in the past two decades, said companies faced challenges owing to gross mismanagement, high levels of indebtedness and under-capitalisation.

He noted that there was a need for legislation that would enable judicial managers to monitor their business plan for the company, even after judicial management, in order to prevent the company from relapsing into crisis.

Bulawayo-based company Merspin was placed under judicial management for the second time last year.

“What happens after a judicial manager has left is not his problem, you cannot blame him if the company fails again. It means management at that company would have failed to implement the business plan that works for the company.

“Government, private sector, banking sector and all stakeholders must come together and make a sacrifice for the manufacturing sector. A revolving fund would be helpful, some companies do not require huge amounts to start operating viably again even at small-scale level until it grows back into a large entity,” he said.

Some companies would have more liabilities than their assets and fail to secure funding for minor repairs.  This, he said, was disastrous and would push the company into judicial management.

Lack of capital was the biggest challenge for distressed companies, including those under judicial management.

“The success of judicial management is measured by the ability to pay all creditors, address corporate governance issues by, for instance, appointing auditors or court credible investors.

“A judicial manager must make sure that the company is up and running again, that it pays taxes to Government and is an employer. However, as long as there is no access to capital, all decisions, rescue plans and efforts the judicial manager makes will not work,” he said.

Dr Madondo added that since the late 1990s, judicial managers have shown commitment to reviving companies unlike in previous years where they would quickly file for the liquidation of troubled firms.

According to the Companies Act Chapter 20:03, a judicial manager has the right to file for liquidation if the company is showing no signs of improving.

“If at any time he (judicial manager) is of the opinion that the continuation of judicial management will not enable the company to become a successful concern, he may apply to the court, after not less than fourteen days’ notice by registered post to all members and creditors of the company, for the cancellation of the relevant judicial management order and the issue of an order for the winding up of the company,” reads part of the Act.

Managing partner at Grant Thornton Camelsa, Mr Reggie Saruchera, who is currently Cairns judicial manager, called for policy reviews that would ensure companies under judicial management are bailed out to make them viable once again.

A mutual relationship between shareholders and the judicial manager would also be vital in ensuring the revival of a company. Over the past decade, the local economy has been riddled with low investor confidence, liquidity constraints and massive exodus of skilled employees to the Diaspora.

But it has been the lack of access to funding that has been most damaging, forcing companies to resort to short-term borrowings with high interest rates.

Big industrial companies such as Gulliver and Steelnet have since closed shop due to unsustainable debts and a lack of funding, while Cairns Foods was placed under judicial management.

Many others including David Whitehead, Road Motor Services, Belmont Leather, National Blankets and Gutsai have had a taste of judicial management.

According to the Confederation of Zimbabwe Industries, the manufacturing sector’s capacity utilisation for 2013 stood at 39,6 percent, down from 44 percent in 2012.


  • comment-avatar

    The inept madondo and his incompetent bogus Tudor house just asset strip for benefit his zanupf cronies

  • comment-avatar
    Bloody agent 8 years ago

    what you mean to say is that 300 companies have been indiginised. it’s the same thing.