By Zvamaida Murwira
Mines and Mining Development Minister Winston Chitando yesterday defended Government’s decision to place Hwange Colliery Company under the control of an administrator as there were no prospects of a turnaround amid rising debt.
He said Hwange Colliery Company had continued to suffer losses, despite coming up with a strategic plan which envisaged huge margins of profits.
Minister Chitando said this while giving oral evidence before the Parliamentary Portfolio Committee on Mines and Energy chaired by Norton MP, Mr Temba Mliswa.
Last week, the Government placed Hwange Colliery Company under the control of an administrator in terms of the Reconstruction of State Indebted Companies and Insolvency Act to avert further worsening of fortunes.
“The story of Hwange Colliery Company is a sad one. If you look at the results of Hwange, the biggest problem is that it has made a gross loss. The revenue you are getting is less than what it is costing to produce,” said Chitando.
He said Hwange Colliery had incurred a net loss of $23 million in its half-year in 2018 despite promising to be working on a $5 million profit in its strategic plan.
Minister Chitando said Hwange had made successive losses over the years.
“That is why fundamentally there is no business in this world which can ever succeed if it is costing you more than your revenue. Who is paying you for that cost?
“In January to December 2017, Hwange for the first time made a profit of $1,3 million, but posted a net loss because that time there were a number of intervention measures.
“January to June 2018 things went berserk; it was now losses, we had a fundamental problem.
“That gave Government warning shots that as a shareholder we have a problem. You now have a deterioration,” said Chitando.
Legislators asked why there were no adequate consultations with other stakeholder such as fellow shareholders before a decision was made.
Questions were also raised on whether the decision to place the coal miner under reconstruction would not scuttle a forensic audit the outgoing board had initiated.
Chitando said the forensic audit would continue and that the results would be made public.
The Minister said the decision to place Hwange under an administrator was meant to arrest a further deterioration. He said the Government wanted Hwange Colliery Company to return to profitability.
He said in terms of the board’s projection, Hwange would make a profit of $269 000 in 2018, $39 million in 2019, $54 million in 2020, $59 million in 2021 and $70 million in 2022. The Herald