Bulawayo companies abusing law to dodge debts

Companies in Bulawayo are abusing the option for judicial management to dodge huge debts they would have accrued and to buy time, judicial managers have said.

This year alone from January to September, the Bulawayo High Court has placed more than 10 firms in key industries under judicial management and three under provisional liquidation as the economy continues to stall.

Firms placed under judicial management include Marvo Stationery, Wet Blue Industries, Lowveld cotton ginner, Romsdal Investments, Chakata Resources Zimbabwe, Tagarira Brothers, Setsail Equipment, Observant Enterprises, Hadad Enterprises, Willsgrove and Savanna Wood.

Lasker Brothers, makers of the Archer brand of shirts; Trade Power and Wenbrough were placed under provisional liquidation.

“Some companies are opting for judicial management just to run away from debts they would have accrued and some because they have no business plan at all. In other words they are abusing the system to buy time,” said Chrispen Mwete of C Mwete and Company, who is a judicial manager.

Judicial management would give companies some breathing space and an opportunity for them to use outside expertise to recover.

Marvo owes 103 workers, who have gone for 20 months without pay, in excess of $200 000 while Chakata Resources owes creditors $357 000, including its employees.

Lasker Brothers has debts of $6.559 million while Trade Power owes $4 million.

Economic analysts have said the situation was exacerbated by a serious liquidity crunch afflicting the economy, high cost of utilities as well as aggressive taxation by a dollar-hungry government.

Another judicial manager, Philip Ndlovu of PNA Chartered Accountants said as judicial managers they were finding it hard to manage some companies because of lack of capital.

“There is no cash for products as customers do not have money,” said Ndlovu, adding that some companies under the judicial management needed restructuring to survive which often takes a long time to complete by which it may be too late to save them.

With the manufacturing sector in particular struggling, some economists have called on the government to provide a stimulus package for firms through concessional funding.- The Source

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