Deal to restart Cold Storage Commission stalls
By Darlington Musarurwa and Ishemunyoro Chingwere
The proposed deal to restart the Cold Storage Commission (CSC) through forging an agreement between creditors and the company is now stuck in a rut after former workers of the parastatal lodged their objections with the High Court.
A compromise between creditors and debtors through a scheme of arrangement is governed by Section 191(1) of the Companies Act.
For the scheme to sail through it has to be agreed on by 51 percent of the available members or through 75 percent (three-quarters) of the exercisable vote.
It is envisaged that through the transaction a new entity, CSC Twenty Sixteen, will take over the assets of the current CSC and re-establish the export business to generate revenue streams in the short-term.
After regaining its footing, CSC intends to recapture the local market in the medium term.
But the plan hinges on the agreement of seven individual deals – with members; lenders; preferred or statutory creditors; workers and the pension scheme; former creditors; concurrent creditors (trade suppliers; and the National Social Security Authority (NSSA) – that will ultimately feed into a composite or global scheme of arrangement.
A key component of the transaction is to secure a moratorium on the repayment of debt to creditors, including re-negotiating the repayment period.
Once agreed, it will be registered with the High Court, which makes it legal binding.
CSC is technically insolvent, with debts of over US$33 million and a negative equity position of US$2 million.
Last week during a scheduled scheme meeting convened on May 18, 2017 at the behest of chairman Mr Muchadeyi Masunda – appointed by the High Court on April 12, 2017 – former workers, led by Clever Chiwandamira, objected to the plan, citing that it was irregularly structured since it allocated considerably less resources to the revival of the ailing meat processor.
Though the ex-workers, who are owed US$4 million, are not part of the scheme, they seemingly have no faith in management’s capacity to steer the CSC through the current challenges.
The worker’s lawyers Lawman Chimuriwo Attorneys at Law argue that while the explanatory note to the scheme alleges that the aggrieved workers are covered by a bilateral agreement, no such arrangement currently exists.
There is therefore a push to involve the former workers as part of the scheme.
They also have issues with the compromises made between CSC, on the one hand, and its creditors Zimra and NSSA on the other, since laws governing Zimra and NSSA do not have provisions for such compromises.
At the centre of the former worker’s gripe with the scheme is the proposal to allocate only US$5 million into the purchase of feeder steers (young oxen neutered for beef), while reserving US$2,1 million for retrenchment packages for workers – predominantly management.
They also argue that it is unfair to consider settling packages for those intending to leave the company now while not honouring outstanding obligations of former workers.
“How can they start settling severance packages of people who want to leave the company now when those that left two years ago are yet to be paid?” argued Mr Chiwandamira in an interview last week.
“Why can’t they redirect that $2,1 million to those that have already left the company first?
“Here is a company that is seeking a new lease of life and they want us to believe they have a chance to restart when they are allocating just $5,4 million for the purchase of beef. Our view is that beef purchases require even more.
“So as long as they are not prepared to restructure the scheme, we will continue to oppose it.
“Our plea is that they consider the plight of the former employees who toiled for the company and also have the needs of the company at heart by investing a large chunk of that money into the company’s core business,” he added.
The matter will now be set down on a date to be fixed by the Registrar of the High Court.
Chairman of the schemes Mr Muchadeyi Masunda, however, confirmed the setback last week.
“A number of disgruntled former employees turned up for the meetings and the basic message they conveyed was that they were not happy and don’t think the company will be revived under the structure of the proposed scheme,” said Mr Masunda.
Lawyers representing CSC — Dube, Manikai and Hwacha — were expected to have filed their heads of argument last week.
But all other parties are agreed to the scheme.
Questionable management conduct
It also emerged last week that the former workers, informed by their past experiences at the State entity, are not confident in the ability and integrity of the current management led by chief executive officer Mr Ngoni Chinogaramombe.
There are still questions surrounding the circumstances through which the memorandum of understanding signed between CSC and the Botswana Meat Commission (BMC) in 2011 collapsed.
Through the deal, BMC supplied more than 24 000 cattle from Okavango and Nguniland farmers whose exports to the European Union had been affected by the 2007 ban over the outbreak of the Foot and Mouth disease.
CSC’s was supposed to slaughter the beasts and get a commission from selling the meat. The parastatal bungled and the deal fell through.
It now owes BMC more than US$1,2 million.
But the former workers claim that CSC management was culpable in collapsing the deal through sheer gross incompetence bordering on fraud.
It is alleged that before the consummation of the arrangement between CSC and BMC, the former’s management pre-emptively sold most of the meat delivery trucks in order to capitalise on hiring out vehicles once deal became operational.
Curiously, in a six-month period between July 11, 2011 and December 2011(the period when the arrangement was still subsisting), more than US$400 000 had been spent on meat delivery trucks.
It gets even worse.
Workers allege that perhaps the most explicit example of malfeasance at the entity was the disappearance, without trace, of a 28-tonne refrigerated trailer laden with beef in 2010.
Further, there are tales of debtors who were supplied meat on credit by the parastatal, only to eventually disguise themselves as creditors by taking advantage of CSC’s sloppy internal systems.
The workers are convinced some of the senior managers had interests in the companies that were bleeding the 79-year-old institution.
NSSA weighs in
The National Social Security Authority (NSSA), which is expected to be a key shareholding post transaction, seems not to be impressed by the current management.
Chairman Mr Robin Vela said last week, “For NSSA the key is always to enable good strategic businesses to function with an independent, professionally qualified management team and competent, non compromised Board that gives Strategic direction.”
The Authority opines that resuscitating the Bulawayo headquartered business will get “economic activity in the South of the country going”.
And the funds are understood to be readily available.
Added Mr Vela: “A team of financial advisors is working on a detailed information memorandum, which, once completed, will give a clearer indication of the amount needed by the business. NSSA has the funds readily available — with an acceptable investment proposal we can disburse in days.”
Structure of the draft scheme
The current draft scheme is premised on a cash injection of US$14,3 million from NSSA in order to restart operations.
Stakeholders however believe that a seminal injection of US$18 million will suffice to bring back the former giant regional meat processor back on the rails.
Much of the investment estimated at US$13,3 million will be used to purchase feeder steers and feedlot costs (infrastructure were cattle are fed and fattened).
An additional US$1 million — US$765 000 for feedlots and US$270 000 for abattoirs — will be used for capital expenditure.
Also, US$1,4 million will go towards repaying the debt owed to the Botswana government and the Botswana Meat Commission, with the latter received the lion share of the cheque at US$1,2 million.
It is envisaged that US$2 million will earmarked for initial overhead costs.
For lenders — which are principally the Zimbabwe Asset Management Company (owed US$2,1 million) and Trust Banking Corporation (US$1,5 million) – a 17 month moratorium has been proposed for Zamco, with first monthly repayments of US$50 401 beginning June 30 next year.
The tenure will be revised to seven years from five.
CSC has also negotiated with the liquidator of Trust Bank to begin making repayments in January 2019, with the debt expected to be liquidated in six years.
But for the 21 statutory creditors owed in excess of US$11,1 million, there will be one-year moratorium on repayments, and thereafter payments will be made over a five-year period.
Similarly structured deals have been made for debts owed to present workers at US$2,1 million and the Pension Fund, which is claiming US$4,4 million.
While the cumulative US$6,5 million will be made in full, a ten-month moratorium has since been proposed.
Though an initial US$290 000 will be made into the Pension Fund, contributions and arrears will be paid over the next 10 years.
Workers based at Bulawayo based tannery Wetblue, a wholly-owned unit of CSC, will be paid US$1,6 million for outstanding salaries through being offered a 20 percent share in the business.
After 10 months, they will be paid US$2 000 in full as final settlement.
But most importantly, once foreign creditors, who include Botswana and lender French Protocol, have been repaid, CSC Twenty Sixteen — the new entity — will get 24 000 cattle from neighbouring country.
Post transaction, there are plans to streamline the business through culling more than 45 workers from various levels for a “leaner and more efficient organisational structure”.
There are plans to raise US$7,5 million for livestock supply schemes and livestock supply schemes feeder programmes.
There is however hope that the business will be successfully rehabilitated as markets have been secured in South East Asia and Angola. The Sunday Mail