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Prosper Ndlovu Business Editor
AGRICULTURE, Mechanisation and Irrigation Development Minister Joseph Made has “never met” the Cold Storage Company (CSC) board to discuss the turnaround strategies for the troubled parastatal since its appointment in 2011, a report shows. Since 2009, the company has been operating at less than 10 percent of its capacity and continues to battle legacy debts running into millions of dollars, which frustrate its viability, findings from the parliamentary portfolio committee on lands, agriculture, mechanisation and irrigation development indicate.
In its first report tabled before Parliament, the committee also said that CSC, a strategic industrial pillar in the economy, was failing to take off, partly because of lack of political will by the government.
“The committee noted with concern that there was a lack of dialogue between the board and the Minister of Agriculture, who is supposed to give policy direction to the company, in line with Section 31 (1) of the Cold Storage Commission Act,” says the report.
“The committee was informed by the board that since its appointment in 2011, they’ve never held any meetings or discussions with the minister. This has the potential to jeopardise any turnaround strategies being proposed for the parastatal.”
CSC was established in 1937 in terms of the Cold Storage Commission Act, with the mandate of procuring, processing and marketing beef, lamb, goat and related products. The government is the sole shareholder in the company that owns three abattoirs in Chinhoyi, Bulawayo and Masvingo.
The firm was commercialised in 1995 and also owns a canning and a tannery subsidiaries, both which are located in Bulawayo, its headquarters. However, the canning company is not operational because of lack of inputs from the parent company while the tannery is currently under judicial management.
The report also shows that out of a total of about 77,000 national slaughters in the first quarter of 2015, CSC only slaughtered about 5,000, which represents 7.3 percent of the total.
The company has a total national head of 792 cattle and its dismal performance is attributed to a number of factors, mainly lack of capital. In terms of finances the committee was informed that CSC posted a loss of $1.3 million in the first quarter of 2015.
The company owes over $28 million to its creditors, mainly to public utilities such as Zesa. It owes employees about $3.5 million for wages and has had some of its assets attached by employees over outstanding wages.
“The company is paying its salaries and other expenses from revenue generated from leasing of some of its properties,” reads the report. The august House also heard that CSC was unable to borrow from local financial institutions due to the high interest rates and short term financing facilities, which make it difficult to service loans.
CSC has been suffering from severe under-capitalisation and requires about $83 million to revamp its operations and operate profitably.
While a few investors have shown interest in partnering with the company such as Royal Ostrindo, which in 2009 offered an investment of $57 million with the government retaining a 50 percent shareholding, the investor withdrew after delays in the approval of the investment. The committee said it could not get adequate reasons for the collapse of the proposal after it failed to meet with the minister after repeated invitations to attend the committee’s sessions.
It said CSC was negotiating with another investor — Alternative Initiation for Development of Africa — who plans to inject capital of $80 million. The committee, however, feared the agreement may fail again because the “government seems to have taken a lackadaisical approach in handling potential investors keen on investing in CSC”.
Two weeks ago CSC management and board met Vice President Phelekezela Mphoko during a tour of industries in the city and presented their intention to mobilise funding internally through the disposal of some of its assets that were lying idle.
The assets have an estimated value of $4.5 million, says the report. The proposal was made to the government in 2012 but has not been approved pending a forensic audit.
Deputy Agriculture Minister Responsible for Livestock, Paddy Zhanda, has also been helpless citing hurdles in approval of CSC turnaround strategy by his superiors.
Minister Made could not be reached for comment on his mobile. The committee conceded a forensic audit was critical but said the process was taking long with adverse effects such as depreciation in value of some of the company’s assets as well as the ballooning of the CSC debt due to interest charges.
Some of the properties earmarked for disposal are in Harare, Kadoma and Gweru. CSC faces severe competition from private abattoirs following the liberalisation of the beef and livestock industry in 1992.
It is estimated that there are over 600 registered and unregistered abattoirs and slaughter poles in Zimbabwe. Prior to liberalisation CSC dominated 50 percent of the market share and by 2002 this had declined to six percent especially after the suspension of exports to the European Union (EU).
The company has a huge infrastructure stock that incur large overheads costs in the form of electricity and water, which makes CSC uncompetitive against the small private abattoirs.
On average, the electricity bill for CSC per month is $35,000 irrespective of the volumes traded while that of a private one is about $5,000, reads the report.
Moreover, most private abattoirs are located on farms and pay lower rates to Rural District Councils (RDCs) whereas CSC operations are located in major towns where urban authorities have higher tariffs than RDCs.
The committee was also informed that there are different hygienic standards that are applied on CSC factories compared to private abattoirs.
CSC factories are categorised as class A, whereas private abattoirs are under category B or less.
For example, an abattoir of CSC requires 62 people to be on the factory floor regardless of the volume while a private abattoir requires only 10 workers for the same service.
To remain functional CSC has opted to offer slaughter services to third parties and in order to attract business, it had to reduce charges to the level of private abattoirs.
However, most customers prefer to slaughter at private abattoirs because there is a low risk of condemnation of the product.
At the same time, private abattoirs are unable to fully observe veterinary regulations in the movement of cattle and this poses a challenge in containment of foot and mouth disease outbreaks.
Online Reporter