HomeBusiness DigestFive firms apply for liquidation

Five firms apply for liquidation

AT least six companies from various sectors of the economy applied for either liquidation or judicial management in January this year, businessdigest has learnt.

By Kudzai Kuwaza

Many companies in Zimbabwe closed shop last year due to harsh economic challenges.
Many companies in Zimbabwe closed shop last year due to harsh economic challenges.

According to statistics availed by the Employers’ Confederation of Zimbabwe(Emcoz), companies from the retail, agriculture and commercial sectors have applied for liquidation with another company from the manufacturing sector applying for judicial management.

The applications in the first month of the year come at a time when the economic crisis is deepening characterised by a debilitating liquidity crunch as evidenced by an acute cash shortage, low capacity utilisation and obsolete equipment.

At least 260 companies from the food, engineering and clothing sectors closed shop last year, with a total of 8 843 workers being retrenched in 2015 and 2016 as the economy continues to contract.

Emcoz president Josephat Kahwema said the application by companies for liquidation and judicial management at the beginning of the year was evidence that the economic crisis is worsening.

“The applications for liquidation and judicial management, as early as January this year, show that things are not well,” Kahwema said.

He said the failure by companies to fund their nostro accounts due to the cash squeeze has contributed to companies halting production and going under.

“If you cannot produce, you cannot sell and if you cannot sell, you cannot pay your workers. This is where we are caught up at the moment.”

The Zimbabwe Congress of Trade Unions secretary general Japhet Moyo told businessdigest on Wednesday that the applications for liquidation is a combination of viability challenges and mismanagement.

“There are two main scenarios that are leading to such applications,” Moyo said.

“The first scenario is mismanagement by company owners. We have seen it before where company owners steal from their own companies and throw it towards liquidation. Because they are companies which are normally privately owned, they avoid arrest for stealing from their own companies.

“The second scenario is the difficult operating environment which has strangled the economy, making it difficult for companies to survive,” he added.

The ZCTU secretary general said the union was concerned with the continued dwindling of companies operating in the country.

The applications for liquidation have come in the same month when more than 260 applications have been made to retrench workers, with more than a quarter of the applications made by state entities.

The commercial sector has the highest number of retrenchment applications with 77, while parastatals have 70 requests to lay off workers.

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