INTERNAL and external pressures continue to batter David Whitehead Textiles Ltd (DWTL), at one time the country’s largest textile firm, dimming prospects for the revival of the company which is perennially placed under judicial management.
Placing a company under judicial management is an acknowledgement of distress but at the same time there is hope that things can be turned around.
The first creditors meeting last Tuesday presaged the path Winseley Militala, the judicial manager appointed in December last year, would travel in a bid to revive the company which employed 5 000 people at its peak but is now a shell of its former self after it stopped producing.
Creditors dismissed Militala saying they had not received the initial report early enough to make meaningful contributions at the meeting and it thus had to be postponed.
This was not all as other creditors had a few weeks earlier approached the High Court seeking the cancellation of a lease agreement between Militala and Kithra Investment where the latter would have used the textile firm’s equipment and premises and pay US$180 000 per month.
Creditors want this deal reversed arguing: “There was no creditors’ approval and we do not know what is there for the stakeholders in the deal,” said a lawyer with Gasa, Nyamadzawo and Associates, a legal firm representing some of the workers. Another group of workers is represented by Scanlen and Holderness.
Sources say workers were split on the best way forward with one group supporting placement under a judicial manager while another wanting provisional liquidation which would have seen DWTL closing shop.
This is not the first time the idea of permanently closing shop was toyed with. In October 2009 DWTL was placed under provisional liquidation only to have the workers successfully apply for the withdrawal of the order and had the firm placed under judicial management marking the second time such a move had been taken.
Militala was also accused of “not informing other parties of what he is doing,” as was the case with the Kithra deal but usually the brief of a judicial manager, who assumes the role of a board of directors, is to formulate and implement a business turnaround strategy until a time when it is proper to hand it over to new management.
Militala faces a plethora of hurdles, such as raising a US$12 million security bond, which many have argued is an overestimate of the value of a company which since 2005 has been stuttering.
Some of the hurdles are not unique to Militala as Cecil Madondo, of Tudor House Marketing, who was the first judicial manager, faced similar problems and at one time had to resign under pressure before he had completed the turnaround.
DWTL appear cursed as recommendations by Madondo were not followed and there is nothing that has changed to see the new management adhering to what Militala would have suggested.
When the story of DWTL is told, there is bound to be gaps and holes which may not be filled such as ascertaining if Elgate which is headed by Andrew Toendepi paid the US$5,4 million for the 51% stake it acquired.
Analysts, however, said the problems faced by DWTL including “serious governance shortcomings and severe liquidity crisis,” may continue even under new management as there are external factors which affect textile industries across the globe.
“Local textile companies may find the going tough because they are not very efficient as the plants were established more than two decades ago,” said Mike Toro an economist. “The local product may not compete with a Chinese or Indian product.”
Toro said the story of the Zimbabwean textile industry is one of a diminishing sector as it faces competition from Oriental fabrics as well as second hand clothing.