Air Zimbabwe (AirZim) board has approached government with a proposal to assume its huge debt overhang accrued from various quasi-government entities, as the struggling state-owned enterprises moves to clean its balance sheet, the businessdigest has learnt.
By Melody Chikono
AirZim is currently saddled with a debt of US$341 million. Of the debt, 92,2% amounting to US$314 million is local debt, while the foreign debt constitutes 8% at US$ 26,1 million. The entity is struggling to court potential investment partners due to its poor balance sheet, among a myriad of other challenges besetting the airline.
AirZim corporate services manager Tafadzwa Mazonde told businessdigest that while the details are confidential, the set-off will be between the airline and government-related institutions.
“From Air Zimbabwe side, we have approached government with a proposal for the facilitation of set off arrangements in respect of the portion of our legacy debts due to quasi-government entities .As for the details on the set off, the correspondences and the proposals were part of a broader proposal including other affairs of the airline which are still confidential. However, the intricacies of the setoff are that it focuses on inter-debts between the airline and government, government departments and parastatals,” he said.
The bigger part of the local debt is with Zimra for PAYE, VAT and Rabated Travel amounting to US$90 679 051 which is 26,58% of the debt followed by Ministry of Transport loans at US$84,9 million (24,89%) while Caaz Nav, PSC, rates amounts to US$36,3 million (10,67%).
Staff salaries and allowances amount to US$36,1 million (10,6%) while CBZ historical overdraft (loan) amounts to US$23 million (6,7%) and NHS Handling amounts to US$20,1 translating to 5,9% of the total debt.
Slightly big debts to non-government entities range from US$500 000 to close to US$2 million includes to Total Zimbabwe, Cimas, and Zuva Petroleum.
The foreign debt is mainly with service providers, pre-tax refunds, staff salaries and statutory obligations in Lusaka and London.
To date, he said the parastatal has managed to offset a significant portion of its staggering debt through “set-off arrangements”.
“This is a process which is currently on going and to date we have managed to extinguish a significant portion of such debt through set off arrangements against what is owed to Air Zimbabwe from some other government related institutions. The government has also stated in various circles that there is a debt takeover process that is in motion,” he said.
In spite of the complexities surrounding negotiations with government, Mazonde said a solution would be found to settle the debt.
Writing-off most of this debt as shareholder contribution will give the airline a completely different picture than the current perception where there is hesitancy to invest and support it.
Last year, the debt ridden airline crafted a plan to turn around its operations.
Under the plan, at least US$45 million is required in the short-term, to return AirZim to viability.
The airline also requires US$6 million to buy a fleet of three planes, US$4,6 million for International Air Transport Association (Iata) clearing house joining fees, among other financial obligations.
Meanwhile, Mazonde said the airline was working on a number of initiatives to stay afloat amid emerging competitors plying its traditional routes.
Various airlines are now plying the Harare-Bulawayo route which used to be a preserve of the national airline.
“Like any other entity, the emergency of competition on previously monopolized routes will in the immediate run affect us. However, we believe competition is healthy and we are preparing well for such.
“We are working on a number of initiatives to cushion us against such competition and this also includes adjusting some of our operations to enable us to competitively withstand the new phenomenon,” he said.