Business / Companies
Bata in $9m recapitalisation dilemma
13 Dec 2010 at 20:09hrs | Views
Bata Shoe Company Zimbabwe, the country's major shoemaker, says it is struggling to raise up to $9 million to recapitalise the business and ramp back to optimality, citing high cost of funds and unfriendly credit terms.
The Gweru-based shoemaker has not been able to repair or maintain equipment in the past 10 years.
Bata managing director Luis Pinto said the shoemaker requires $3 million to meet short-term working capital needs and the balance to invest in the modernisation of machinery, technology and communication networks.
"Our main problem is lack of working capital; our estimation is that we need $3 million to operate under normal conditions and to generate faster growth," Pinto said.
"Raising money in the local market is difficult. The high cost of interest makes it unfeasible. But we have not approached government to request financial assistance."
Pinto said the capital crisis was affecting the procurement of critical raw materials. As a result, he said, the firm is only utilising about 40% of plant capacity at present.
The available capacity is being funded by Bata's sister companies that arrange facilities of up to 90 days to keep the flow of raw materials.
Pinto said the company was looking forward to the new productive sector facility established by government and the African Import-Export Bank.
Bata Zimbabwe has operated in the country for the past 70 years and distributes footwear through its retail stores countrywide and a number of southern African countries.
It employs 1 600 workers. The company's average weekly shoe output is 40 000 pairs.
"We hope to achieve two million pairs in terms of production in 2010. This means 70% more than last year. Our plan for 2011 is to grow 25% at least in local and export markets."
Apart from working capital and underutilisation challenges, Bata also faces crippling production costs.
The Gweru-based shoemaker has not been able to repair or maintain equipment in the past 10 years.
Bata managing director Luis Pinto said the shoemaker requires $3 million to meet short-term working capital needs and the balance to invest in the modernisation of machinery, technology and communication networks.
"Our main problem is lack of working capital; our estimation is that we need $3 million to operate under normal conditions and to generate faster growth," Pinto said.
"Raising money in the local market is difficult. The high cost of interest makes it unfeasible. But we have not approached government to request financial assistance."
Pinto said the capital crisis was affecting the procurement of critical raw materials. As a result, he said, the firm is only utilising about 40% of plant capacity at present.
The available capacity is being funded by Bata's sister companies that arrange facilities of up to 90 days to keep the flow of raw materials.
Pinto said the company was looking forward to the new productive sector facility established by government and the African Import-Export Bank.
Bata Zimbabwe has operated in the country for the past 70 years and distributes footwear through its retail stores countrywide and a number of southern African countries.
It employs 1 600 workers. The company's average weekly shoe output is 40 000 pairs.
"We hope to achieve two million pairs in terms of production in 2010. This means 70% more than last year. Our plan for 2011 is to grow 25% at least in local and export markets."
Apart from working capital and underutilisation challenges, Bata also faces crippling production costs.
Source - AFP
