Opinion / Columnist
Ministers endorse corruption at Hwange Colliery Company
22 Apr 2017 at 17:52hrs | Views
The Hwange Colliery leadership proposed scheme of arrangement of creditors has the apparent support of the ministry of mines and finance. This is viewed as a panacea to resolving the insolvency of the company. The support is evidenced by the ministry of finance availing treasury bills of $ 150 million to the company to settle creditors partially as an enticement to vote in favour of the scheme which according analysts is deemed as inadequate in setting the company towards recovery. The mining contractor Mota Engil has reportedly been paid treasury bills of $ 41 million. The ministry of finance has also assumed the RBZ/PTA bank loan of $18.3 million through issuance of treasury bills.
The company's annual report of 2014 carries a statement by the then chairman, Mr F Mutambangira implying that the company has been short changed by some suppliers some of whom are part of creditors referred to as legacy debts. In the chairman's report the chairman advised stakeholders as follows;
"The impact of legacy debts on current cash flows continued to inflict pain on the operations of the company and torpedoed the turnaround initiatives. During the year under review, a total of $25 million was paid towards liquidation of legacy debts whose balance has come down to $ 136 million. This is in addition to $ 35 million which was applied to legacy debts in 2013. A review of the legacy debts established delinquent conduct on the part of the parties involved and in due course the company will take appropriate action."
The company has not taken appropriate action to date. The company is instead seeking to reaffirm such delinquent creditors as genuine by proposing a scheme meeting of creditors without first carrying out a thorough forensic audit. A forensic audit would identify such creditors who are crowding out genuine business partners of the company. The ministers involved are concretizing unscrupulous dealers with the company in what analysts view as part of the reasons why government critics see as cover up of corrupt activities in institutions where government has involvement. HCCL has been treated as a parastatal with government using its 37 per cent shareholding to the detriment of other shareholders and stakeholders.
The minister of mines in particular has not demonstrated character once pronouncing that the leadership has three months to reach acceptable mining levels. The regional political leadership has been conspicuously absent with the vice president threatening uncertain action if the company executive continues to fail to pay workers. In the performance of HCCl another Zisco Steel, Mashava and Kamative mines are in the making, dead mining towns brought to their knees by corruption, mismanagement and an uncaring leadership. The community of Hwange with orphans from the 1972 Wankie mine disaster loathe the day Anglo America Corporation moved out of Hwange in 1990. The black gold town is a pale shadow of its former glory.
Am reliable informed that the board of directors of the company in their December 2015 board meeting resolved that a forensic audit on creditors should be conducted. This has not been done. The dissolved board dominated by government appointed members was replaced by the Winston Chitando led board in the first half of 2016. There are three members from the former board, Ms J Muskwe, Mr V Vera (representative from ministry of mines) and Mr T Makore as Managing Director. The retained members were part of the resolution and in the interest of protecting the company and other stakeholders they should have raised a red flag. This is major omission for a board that should seriously deal with a major player in the economy that under normal circumstances given its condition would now be in the graveyard of liquidation.
Hwange Colliery is an integral part of the country's energy sector and has been the sole supplier of coal to thermal power stations and steam coal for industrial use.
The urban power stations whilst facing other challenges have not been operating partly due to lack of coal. The Hwange Power Station (HZPC) has not been spared as Makomo Resources which has become the dominant supplier has been handicapped by an overdue debt of $25 million which ZPC has been failing to settle. It is reported that mining output at HCCL has dropped to an all -time low of 36 000 tons per month from an average of 300 000 tons. Makomo is producing 60 000 to 70 000 tons per month. HPC requires 3 000 to 4 000 tons per day and Makomo has been struggling to make adequate supplies.
There is lack of will to deal with wrongs in the past which commit the company to obligations in which no value may have been given. The scheme of arrangement does not address issues of fraudulent transactions which are still sitting as creditors. The publicised scheme recognises that mismanagement has contributed to the fall of the company.
I. The publication states as follows; " The company has failed to service its debts mainly due to a combination of factors which include the following:
a) Slump in global commodity prices
b) Mismanagement of its affairs
c) Poor cost control
d) Undercapitalised and shortage of critical working capital
e) Low production levels due to technical challenges with equipment
The factors are all related to management and corporate governance issues from a leadership which is seeking to continue leading in the company.
Failure to deal with issues of mismanagement shows that those who are occupying positions of trust in the public service and within the firm are conflicted as there is a serious omission of duty.
1. Conclusion
The promise of a better future for the company is not new as evidenced by the statements by the chairman and managing director of the company. In the 2014 annual report the chairman made the following promise; " The company's current initiatives will no doubt overturn the loss position and return to profitability in the medium to short term given the strong operational base attributed to capitalization and contractor."
The intervention and recapitalization initiatives mentioned above will result in improved production performance and expected to be at least 450 000 tons per month."
The results of the company are a direct opposite of this commitment.
The current chairman in his report to shareholders for the half year ended 30 June 2016 promised that the company would be in a profit position in the year 2017. However in his latest publication to shareholders for the full year ended 31st December 2016 he states that the company will achieve a breakeven position.
The reflection in the market since the beginning of the current year is that the company has hardly supplied anything meaningful to the market to achieve the promised positions. The conflicting statements clearly indicate lack of clarity in long term strategic direction and management of the company.
The company's annual report of 2014 carries a statement by the then chairman, Mr F Mutambangira implying that the company has been short changed by some suppliers some of whom are part of creditors referred to as legacy debts. In the chairman's report the chairman advised stakeholders as follows;
"The impact of legacy debts on current cash flows continued to inflict pain on the operations of the company and torpedoed the turnaround initiatives. During the year under review, a total of $25 million was paid towards liquidation of legacy debts whose balance has come down to $ 136 million. This is in addition to $ 35 million which was applied to legacy debts in 2013. A review of the legacy debts established delinquent conduct on the part of the parties involved and in due course the company will take appropriate action."
The company has not taken appropriate action to date. The company is instead seeking to reaffirm such delinquent creditors as genuine by proposing a scheme meeting of creditors without first carrying out a thorough forensic audit. A forensic audit would identify such creditors who are crowding out genuine business partners of the company. The ministers involved are concretizing unscrupulous dealers with the company in what analysts view as part of the reasons why government critics see as cover up of corrupt activities in institutions where government has involvement. HCCL has been treated as a parastatal with government using its 37 per cent shareholding to the detriment of other shareholders and stakeholders.
The minister of mines in particular has not demonstrated character once pronouncing that the leadership has three months to reach acceptable mining levels. The regional political leadership has been conspicuously absent with the vice president threatening uncertain action if the company executive continues to fail to pay workers. In the performance of HCCl another Zisco Steel, Mashava and Kamative mines are in the making, dead mining towns brought to their knees by corruption, mismanagement and an uncaring leadership. The community of Hwange with orphans from the 1972 Wankie mine disaster loathe the day Anglo America Corporation moved out of Hwange in 1990. The black gold town is a pale shadow of its former glory.
Am reliable informed that the board of directors of the company in their December 2015 board meeting resolved that a forensic audit on creditors should be conducted. This has not been done. The dissolved board dominated by government appointed members was replaced by the Winston Chitando led board in the first half of 2016. There are three members from the former board, Ms J Muskwe, Mr V Vera (representative from ministry of mines) and Mr T Makore as Managing Director. The retained members were part of the resolution and in the interest of protecting the company and other stakeholders they should have raised a red flag. This is major omission for a board that should seriously deal with a major player in the economy that under normal circumstances given its condition would now be in the graveyard of liquidation.
Hwange Colliery is an integral part of the country's energy sector and has been the sole supplier of coal to thermal power stations and steam coal for industrial use.
The urban power stations whilst facing other challenges have not been operating partly due to lack of coal. The Hwange Power Station (HZPC) has not been spared as Makomo Resources which has become the dominant supplier has been handicapped by an overdue debt of $25 million which ZPC has been failing to settle. It is reported that mining output at HCCL has dropped to an all -time low of 36 000 tons per month from an average of 300 000 tons. Makomo is producing 60 000 to 70 000 tons per month. HPC requires 3 000 to 4 000 tons per day and Makomo has been struggling to make adequate supplies.
There is lack of will to deal with wrongs in the past which commit the company to obligations in which no value may have been given. The scheme of arrangement does not address issues of fraudulent transactions which are still sitting as creditors. The publicised scheme recognises that mismanagement has contributed to the fall of the company.
I. The publication states as follows; " The company has failed to service its debts mainly due to a combination of factors which include the following:
a) Slump in global commodity prices
b) Mismanagement of its affairs
d) Undercapitalised and shortage of critical working capital
e) Low production levels due to technical challenges with equipment
The factors are all related to management and corporate governance issues from a leadership which is seeking to continue leading in the company.
Failure to deal with issues of mismanagement shows that those who are occupying positions of trust in the public service and within the firm are conflicted as there is a serious omission of duty.
1. Conclusion
The promise of a better future for the company is not new as evidenced by the statements by the chairman and managing director of the company. In the 2014 annual report the chairman made the following promise; " The company's current initiatives will no doubt overturn the loss position and return to profitability in the medium to short term given the strong operational base attributed to capitalization and contractor."
The intervention and recapitalization initiatives mentioned above will result in improved production performance and expected to be at least 450 000 tons per month."
The results of the company are a direct opposite of this commitment.
The current chairman in his report to shareholders for the half year ended 30 June 2016 promised that the company would be in a profit position in the year 2017. However in his latest publication to shareholders for the full year ended 31st December 2016 he states that the company will achieve a breakeven position.
The reflection in the market since the beginning of the current year is that the company has hardly supplied anything meaningful to the market to achieve the promised positions. The conflicting statements clearly indicate lack of clarity in long term strategic direction and management of the company.
Source - Reginald Shoko
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