Martin Kadzere Senior Business Reporter
DAVID Whitehead (DW)’s new major shareholder yesterday vowed to leave no stone unturned to ensure the textile firm, once listed on the Zimbabwe Stock Exchange, is resuscitated. Through his vehicle Agri Value Chain Zimbabwe (AVCZ), Praduman Kumar Ganeriwal acquired 51 percent stake in DW for $5,4 million in a development that will pave way for the long awaited resuscitation of the fabric maker.
The eight year-long hunt for an investor for DW was sealed recently with AVCZ becoming the majority shareholder. DW is at present under final judicial management of Mr Knowledge Hofisi. Its creditors are largely constituted by workers who are owed $8 million.
The shareholding acquired by AVCZ was previously owned by Elgate Holdings, which lost its 51 percent after failing to pay fully for the shares more than a decade after signing a share subscription agreement with David Whitehead. The agreement was terminated early last month on the basis of “non-performance” by Elgate when the High Court ruled the concession for the purchase of the shares be revoked. In terms of section 30 of the company’s articles of association, “any shares forfeited shall be deemed to be the property of the company, and the directors, may sell, re-allot or otherwise dispose of the same in such as manner they think fit.”
In an interview with The Herald Business, Mr Ganeriwal said the company will immediately embark on reconstruction, subject to approvals by creditors and members. This entails clearing all legacy issues, including settling the statutory arrears.
“In the short term, we are going to create a panel of local experts along with technical experts from India and Europe for them to assess the existing plant and ascertain the requirements so that we can immediately start operations,” he said.
“We will start this as soon as our reconstruction is approved by all the creditors and members as well as (obtaining) necessary approvals from authorities. That is the only time we will be allowed to enter the premises because the company still remains under judicial management. So as the shareholder, we do not have the authority.
“In the short term, we think that if we inject US$2 million towards retooling, that should enable us to produce a reasonable quantity and good quality of fabric. As a company, we will mobilise this amount from our sister companies.”
Some of the local businesses that Mr Ganeriwal, also known as PK in the business circles, has interests in include two cotton ginneries in the Lowveld and Kadoma, ca orrugated packaging plant in Harare, a business he jointly owns with Natpack; a cooking oil factory which produces ZimGold brands as well as a milling and snack plant.
In Zambia, Mr Ganeriwal owns three cotton ginneries, runs a 94 000 hectare outgrower cotton contract farming scheme and two oil seed crushing plants. He also has interests in mining (ferro manganese). In Malawi, he owns a cotton ginnery and has invested in an oil seed crush plant with annual capacity of 600 000 tonnes.
Apart from reviving DW, Mr Ganeriwal will also invest in a garment factory in Chegutu.
“For long term plan we would need around US$10-12 million to modernise.”
“For this, we will be approaching regional financial institutions. We will also be approaching the Export-Import Bank of India because it finances overseas companies when the machines are being exported outside India. India is one of the biggest producers of textile machines. We will work on all the options available to us so that activities can be re-started. Spinning operations will continue in Kadoma while the dying and processing will remain in Chegutu,” he said.
When it re-opens, DW would give preference to the current employees.
“Basically the skills are there; we do not need to re-invest the wheel. We will definitely prefer to work with the existing skills,” said Mr Ganeriwal.
DW woes began around 2006 when the company — weighed down by operational challenges and saddled with huge debts was first placed under judicial management.
Since then, it remained under the Court-sanctioned reconstruction under three different administrators. Dr Cecil Madondo of Tudor House Consultants was appointed in 2005 and managed the company until 2008. Two years later, Elgate applied for another judicial management after DW plunged into another financial crisis.
Mr Winsley Militala of Petwin Executor and Trust Co, was appointed provisional judicial manager of the company. The sun almost set for DW after Mr Militala recommended liquidation of the company, arguing it had failed to secure investors.
In his report, Mr Militala said the judicial management was not “serving any purpose” as no investor was prepared to inherit the company’s huge debt. He said access to capital was a “virtual impossibility” as banks at that time had little funds to lend.
The little funding available was on a short-term basis, which was not aligned to the firm’s trading cycle. In 2014, DW was saved from liquidation after the High Court granted final judicial management order with Mr Hofisi subsequently confirmed the final judicial manager.
Production suffered significantly over the past years due to intermittent operations caused by lack of capital needed to retool the company’s heavily antiquated equipment. The heavily-indebted company has been struggling with capital, prompting the Reserve Bank of Zimbabwe, through its asset management firm Zimbabwe Asset Management Company to step in with $2 million bailout last year to drive the turnaround.
However, the funds were “too little” to support the turnaround of the company.
Formerly owned by Lonrho plc before a management buyout in 2001, led by former CEO Mr Edwin Chimanye, it has three factories in Chegutu, Kadoma and Gweru.
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