Government demands audit of Cold Storage Company before approving $80m investment

Zimbabwe’s state-owned meat processor, the Cold Storage Company (CSC), says it has secured an investor to inject $80 million into its struggling business but government is withholding approval, demanding a forensic audit to ascertain the state of the company.

CSC, at one time the largest meat processor in Africa, handled up to 150 000 tonnes of beef and associated bi-products a year and exporting beef to the European Union.

Mismanagement and persistent outbreaks of foot and mouth diseases halted the exports in 2001, affecting its viability.

Since then, the parastatal has lurched from one crisis to another, underlined by a $25 million debt and the closure of its plants in Kadoma, Marondera and Chinhoyi in recent years.

It has also run up losses of around $6 million annually for the past decade.

Chief executive, Ngoni Chinogaramombe told a parliamentary portfolio committee on agriculture yesterday that the company had submitted three turnaround strategies since 2009 which had not been approved by government, the shareholder.

He said in 2009 a plan by an Indonesian investor to inject $57 million into the company through a joint venture failed after government took too long to approve the deal.

In 2012, CSC submitted another proposal to dispose the company’s non-core assets to raise $8.5 million, which was also rejected.

Another plan, submitted in November 2013 and included disposal of idle assets for $14.5 million and proposals for joint ventures met the same fate.

“This plan is still to be approved by government, which has demanded that a forensic audit be carried out before finalising consideration of the plan,” Chinogaramombe said.

“There is one very keen prospective partner who is chasing us every time that they would want to bring in $80 million into CSC once the plan has been approved,” he said, without disclosing the name of the investor.

Pressed by Members of Parliament to explain why the shareholder was refusing to accept its turnaround strategies, Chinogaramombe said government wanted to institute a forensic audit first to understand its status.

“That process has just started, auditors are starting to come to CSC to get some information,” he said.

CSC board chairman, Lindela Ndlovu accused government of holding on to assets that were not profitable and urged MPs to assist.

“Government has ownership mentality that is problematic, whether we are gaining any money or not we (government) are still willing to hold on to assets that are costing (us),” he said.

He said the board had gone through three turnaround proposals and government was taking too long to decide.

“When an investor comes, they are not only looking at Zimbabwe or CSC, they are looking at a broad base of basket and if we take  two or three years to make a decision they are not going to sit on their money, they will move to where people make fast decisions,” he said.

In the meantime, Chinogaramombe said the company had entered into long-term lease agreements on two of its ranches in Masvingo and Matabeleland South with cattle producers to utilize the farms and would be compensated through 10 percent heifers annually.

The company posted a loss of $1.4 million for the first quarter this year against a budgeted loss of $1.6 million due to undercapitalisation and low capacity.

“This year we are operating at a very low capacity just as has been happening in the past few years,” he said.

Its tannery was affected by export of raw hides but government recently imposed a 75cents per kg export levy for raw hides, which has seen an increase in locally processed hides from 1 000 per month in January to 10 000 in May.

Challenges facing the company include lack of long-term funding, antiquated equipment, declining market share which dropped to below 40 percent since government deregulated the beef industry in 1992.

The company’s debts have ballooned to over $25 million from $9 million in 2009, mainly from fixed costs such as wages, rates and taxes on land.

CSC owes its 413 employees $3.5 million in salary arrears.

“Some of our creditors including employees have been taking legal action. We are just facing a situation which is likely to explode one day,” he said.

The company has capacity to slaughter 700 000 animals per year but last year the country slaughtered 284 000 animals.

In the first five months to May, the country slaughtered a total of 97 000 animals of which CSC slaughtered 5 600.

CSC has three functioning abattoirs in Chinhoyi —  which has limited operations — Bulawayo and Masvingo while the Kadoma and Marondera plants were mothballed.

Its tannery is operating at limited capacity and has three selling depots in Harare, Gweru and Mutare and seven ranches countrywide.-The Source

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