Bulawayo City Council business ventures in trouble
By Vusumuzi Dube
The Bulawayo City Council’s commercial undertakings are reportedly faced with a bleak future with city councillors and officials considering shutting down some of the business ventures after they recorded significant losses in the last few years, it has been learnt.
The local authority has a number of business units under its jurisdiction, these include the Bulawayo Municipal Commercial Undertaking (BMCU) and the City of Kings Business Venture. However, in the latest developments the local authority is reportedly considering closing shop at the latter as the venture has failed to break even in the past few years.
Business units that fall under the City of Kings Business Venture include Mguza and Mazwi nature parks, Mzilikazi Art, Craft and Pottery Centre and Parks Nursery and the Council Caravan Park.
According to a council confidential report the venture was finding it difficult to run the various units as they had high expenditure and very low income, with the biggest cost driver being salaries and electricity costs.
The council is thus considering retaining some of these units or privatising them and totally dissolving the City of Kings Business Venture.
The venture was declared technically insolvent by its board in January 2013 after an arbitration award that ruled in favour of its employees.
It has also been noted that the venture was solely getting its income from sales at the Caravan and Parks Nursery, with very little income coming from the Nature Parks and Mzilikazi Art, Craft and Pottery Centre.
“City of Kings Business Venture is currently incurring a deficit of between $25 000 to $30 000 per month, a situation not healthy for the company which is supposed to declare a dividend to its shareholder.
“The only solution to this problem has been declared as increases of sales and or reduction of costs, plans to increase revenues are under way through the capitalisation programme being financed by council as special council resolution of 12 June 2013, while introduction of a new and affordable salary scale through a works council agreement has also been considered as a major strategy of taming this major cost driver,” read part of the minutes.
The Art and Craft Centre’s demise has been blamed on economic malaise and fall in tourist arrivals into Zimbabwe. It has also been revealed that the venture was failing to pay off its high salaries pegged according to the local authority’s salary scales.
“Mzilikazi Art, Craft and Pottery Centre had continued to produce but very little sales were taking place, as a result stock levels had continued to rise, with stock values currently at $41 000, average sales were at $2 385 per month, total expenses average $10 000 per month, the gap $7 900 was bridged from Parks Nursery and Caravan Park incomes.
“This was unsustainable as the company also needed to grow the business, the team noted that the centre had an important social contribution in the city, it was important that council carried out a detailed study on how to take over the operations at Mzilikazi Art, Craft and Pottery Centre,” read the minutes.
In a report to the local authority’s business committee, the venture’s general manager, a Mr M Munthali, acknowledged the problems they were facing as an entity, saying that their business model was itself quite outdated.
“While funding is being received it has come to the attention of management that City of Kings Business Venture’s business model requires a review as a result of drastic economic changes that have occurred in the last few years and that the company is still experiencing monthly deficits as a result of some non-performing entities that are cannibalising on potentially viable entities, such as Caravan Park and Parks Nursery, which are worth keeping under City of Kings Business Ventures.
“To this result it is recommended that some entities like the Mzilikazi Art and Craft Centre can no longer be operated on a commercial basis as a result of the collapse of the local pottery industry, while at the same time the process of seeking a strategic partner for Mguza and Mazwi Nature Parks is still a noble idea,” said Mr Munthali. Sunday News