CSC disputes leave investors with cold feet

Published: 23 July 2017

DELAYS in resolving the dispute between the Cold Storage Company (CSC) and its creditors, mainly former workers, is likely to frustrate investors and prejudice already secured markets, analysts have warned.

The proposal to ink a Scheme of Arrangement with creditors, who are owed about $33 million, has stalled after disgruntled ex-workers challenged the 18 May, 2017 scheme outcome at the High Court. The matter is still pending at the courts, placing the $18 million deal with the National Social Security Authority (Nssa) in disarray.

Although CSC had secured markets in Angola, South East Asia and West Africa, experts say the company risks losing these to competitors. Economic analysts suggest that the CSC board and management should urgently engage the ex-workers, who are owed about $4 million and are not part of the Scheme of Arrangement, to convince them about the merit of the agreement, so as to pave way for progress in the investment.

Economic analyst, Mr Reginald Shoko, said the CSC leadership has no option but to engage workers and show commitment to address their interests.

"Workers are the stumbling block in this deal because the Scheme by nature is not an equal arrangement as it puts workers on the periphery. But given that the investment is there, workers must be engaged amicably. CSC should also get new management instead of retaining the same team that supervised the demise of the company," he said.

It is the workers' contention that the Scheme was irregularly structured since it allocated considerably less resources to the revival of the ailing meat processor and want to be part of the deal. 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.

"I think the long and short of it is that CSC lacks leadership that will give the company direction. There is a huge leadership gap and that is what CSC needs now. We need a leadership that can pro-actively make decisions to avoid such delays," said Mr Donald Khumalo, a livestock enthusiast and former Zimbabwe Commercial Farmers Union president.

"The board and management should frankly engage its stakeholders, particularly workers and convince them on why the company has to be revamped. That is what other companies are doing and we wonder what the leadership there is doing."

An official who participated in the Scheme meeting and spoke on condition of anonymity, said CSC was likely to lose the investment due to delays in resolving the stalemate as well as suffer loss of key markets that had expressed interest in the company's products.

"CSC revival hinges on this $18 million Nssa deal and management and board should ensure they don't lose this opportunity. It appears workers and creditors do not have confidence in the new board and management," said the official.

"These squabbles are likely to prejudice markets and frustrate everybody who is keen to see CSC being revived. This is the company that, together with NRZ, should assist in the revival of Bulawayo in particular and the economy. Our Government should also look into this seriously."

Nssa has also expressed its reservations over the integrity of the management under Mr Ngoni Chinogaramombe and the newly appointed board led by Mrs Sylvia Khumalo-Jiyane. No changes have been made yet and the board has not issued any public statement on how it intends to turnaround CSC.

The official said that the Botswana government, as one of the creditors, had pledged to provide up to 20 000 beasts for slaughter at CSC, once revived, which still has a sound infrastructure and European Union certified facilities.

Experts say a compromise between creditors and debtors through a Scheme of Arrangement should be finalised urgently. 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 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 $33 million and a negative equity position of $2 million.

Comment could not be obtained from the Deputy Minister of Agriculture, Mechanisation and Irrigation Development responsible for livestock, Paddy Zhanda while the Scheme of Arrangement chair, Mr Muchadeyi Masunda, declined to comment and referred questions to the board.

Mr Masunda is, however, on record saying the disgruntled former employees were not happy and don't think the company will be revived under the structure of the proposed Scheme.
- sundaynews

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