Business / Companies
National Blankets halts production as tiff with Zimra escalates
21 Nov 2021 at 03:51hrs | Views
TEXTILE giant National Blankets has temporarily stopped production after the manufacturing firm failed to settle a ZW$800 000 Zimbabwe Revenue Authority (ZIMRA) debt.
The Bulawayo company only operated for a month after coming out of judicial management, a development which ignited hope within the health sector as most hospitals rely on the company produced blankets.
National Blankets was established in 1939 and employed more than 5 000 workers during its peak period. It was forced to halt operations after it failed to secure raw materials as the tiff with the tax collector continued to escalate.
The $800 000 debt has seen the company being denied a tax clearance which enables the firm to import the bulk of its raw materials.
The plight of the textile giant came to light when the Minister of State for Bulawayo Provincial Affairs and Devolution, Cde Judith Ncube toured the company on Wednesday last week.
Business Development Manager Mr Shepherd Nyambirayi told the minister and her delegation that they were now on track but have hit a snag owing to the tax collector's commitments which are yet to be met.
"In 2002 due to an avalanche of challenges we went into voluntary judicial management, in 2015 the company ceased operations because of viability challenges.
Unlike most companies which when they go under judicial management, the next thing is that they liquidate, fortunately we did not liquidate, the shareholders managed to pay all creditors their dues last year.
This has seen us coming out of judicial management and we are on a clean sheet.
That is a positive that we have and we are ready to run," he said.
He went on: "We resumed operations on 11 September 2021 after getting one month tax clearance, however, amid a number of challenges. We faced a challenge very unique to us with Zimra, we were denied a tax clearance and this meant we could not start production just before the winter season.
The plan was to reopen in April in preparation for the winter season as our product is seasonal. At the same time, we have challenges in importing raw materials, we have stocks here but we cannot trade because we do not have tax clearance, if you try to trade then clients will request a 10 percent withholding tax which will eat into the profits."
Ms Fungai Utete in the finance department of the company weighed in; "Before we came out of judicial management, we were engaging all our creditors and Zimra was part of them.
There were correspondences where they agreed to waive all penalties and on the balance that was outstanding money, we had agreed that we will pay 50 percent of that amount and the 50 percent they will write off, that is how we managed to come out of judicial management.
"As of June 2021, they were saying we owe $753 000. In April 2021 when we now wanted to bring in containers, we approached Zimra to get a tax clearance and they told us that we were owing the same amount they said they were going to write off.
When we followed up with the issue, we were told last week there was never an authority from the Minister (Finance and Economic Development) to write off the balance. So now we have to apply to the minister directly, so as of now we are still owing, so they can't issue a tax clearance until we clear that amount," she said.
Mr Nyambirayi said the raw materials imported have since been consumed hence halting production and they had to send workers back home as there was nothing on the floor for production. Minister Ncube, however, said the company must seek audience with the Minister of Finance and Economic Development Professor Mthuli Ncube.
"Your product is very key. I remember there was a donation to one of our hospitals and the type of blankets donated were the imports (two-in-one) and the Department of Health said the blankets were not ideal for hospital set ups.
They said the ones manufactured by National Blankets were the required standard recommended for hospitals," she said.
Mr Nyambirayi corroborated.
"It is true, the two-in-one blanket in their nature are knitted blankets while our type is woven. Those blankets cannot manage the forces they are exposed to in the washing process as they are washed frequently with washing machines so they cannot withstand that pressure and they also cannot maintain their dimensional stability.
They reduce in size after a few washes. But ours can withstand those forces and maintain dimensional stability over a period of time," he said.
He said funding was also a major challenge.
"The idea was to start small and grow gradually hoping that if we had started in April 2021 for this year's winter season, by now we should have managed to raise more capital for the next winter but funding remains a challenge. We need an injection of US$1,5 million to start afresh.
We hope when the Minister of Finance and Economic Development disburses the Special Drawing Rights funds from the International Monetary Fund, we hope he will consider us as well. I understand that he said part of that funding goes to the manufacturing sector.
We hope he will consider us as we were identified as a strategic organisation and are included in the eighth cycle of the 100-day programme," added Mr Nyambirayi.
The Bulawayo company only operated for a month after coming out of judicial management, a development which ignited hope within the health sector as most hospitals rely on the company produced blankets.
National Blankets was established in 1939 and employed more than 5 000 workers during its peak period. It was forced to halt operations after it failed to secure raw materials as the tiff with the tax collector continued to escalate.
The $800 000 debt has seen the company being denied a tax clearance which enables the firm to import the bulk of its raw materials.
The plight of the textile giant came to light when the Minister of State for Bulawayo Provincial Affairs and Devolution, Cde Judith Ncube toured the company on Wednesday last week.
Business Development Manager Mr Shepherd Nyambirayi told the minister and her delegation that they were now on track but have hit a snag owing to the tax collector's commitments which are yet to be met.
"In 2002 due to an avalanche of challenges we went into voluntary judicial management, in 2015 the company ceased operations because of viability challenges.
Unlike most companies which when they go under judicial management, the next thing is that they liquidate, fortunately we did not liquidate, the shareholders managed to pay all creditors their dues last year.
This has seen us coming out of judicial management and we are on a clean sheet.
That is a positive that we have and we are ready to run," he said.
He went on: "We resumed operations on 11 September 2021 after getting one month tax clearance, however, amid a number of challenges. We faced a challenge very unique to us with Zimra, we were denied a tax clearance and this meant we could not start production just before the winter season.
The plan was to reopen in April in preparation for the winter season as our product is seasonal. At the same time, we have challenges in importing raw materials, we have stocks here but we cannot trade because we do not have tax clearance, if you try to trade then clients will request a 10 percent withholding tax which will eat into the profits."
Ms Fungai Utete in the finance department of the company weighed in; "Before we came out of judicial management, we were engaging all our creditors and Zimra was part of them.
"As of June 2021, they were saying we owe $753 000. In April 2021 when we now wanted to bring in containers, we approached Zimra to get a tax clearance and they told us that we were owing the same amount they said they were going to write off.
When we followed up with the issue, we were told last week there was never an authority from the Minister (Finance and Economic Development) to write off the balance. So now we have to apply to the minister directly, so as of now we are still owing, so they can't issue a tax clearance until we clear that amount," she said.
Mr Nyambirayi said the raw materials imported have since been consumed hence halting production and they had to send workers back home as there was nothing on the floor for production. Minister Ncube, however, said the company must seek audience with the Minister of Finance and Economic Development Professor Mthuli Ncube.
"Your product is very key. I remember there was a donation to one of our hospitals and the type of blankets donated were the imports (two-in-one) and the Department of Health said the blankets were not ideal for hospital set ups.
They said the ones manufactured by National Blankets were the required standard recommended for hospitals," she said.
Mr Nyambirayi corroborated.
"It is true, the two-in-one blanket in their nature are knitted blankets while our type is woven. Those blankets cannot manage the forces they are exposed to in the washing process as they are washed frequently with washing machines so they cannot withstand that pressure and they also cannot maintain their dimensional stability.
They reduce in size after a few washes. But ours can withstand those forces and maintain dimensional stability over a period of time," he said.
He said funding was also a major challenge.
"The idea was to start small and grow gradually hoping that if we had started in April 2021 for this year's winter season, by now we should have managed to raise more capital for the next winter but funding remains a challenge. We need an injection of US$1,5 million to start afresh.
We hope when the Minister of Finance and Economic Development disburses the Special Drawing Rights funds from the International Monetary Fund, we hope he will consider us as well. I understand that he said part of that funding goes to the manufacturing sector.
We hope he will consider us as we were identified as a strategic organisation and are included in the eighth cycle of the 100-day programme," added Mr Nyambirayi.
Source - Sunday News
