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THE situation at Hwange Colliery Company Limited (HCCL) is disturbing and calls for urgent intervention by the government to restore normal operations.
As we report in our business section today, the company’s existence is under threat given plummeting output and failure to adequately supply coal to thermal power stations.
Reports that HCCL is struggling to secure fuel and explosives point to a serious crisis in the company, which has a strategic role in the country’s economy.
It is disheartening that HCCL is failing to break even less than a year after the government facilitated the procurement of equipment worth $32 million in June last year.
Shareholders and Zimbabweans at large expect this company to be producing efficiently and actually declare a dividend. Sadly, the colliery has been reduced to a shadow of its former itself to the point of failing to secure its own fuel among other basic raw materials needed for daily operations.
We reported that inadequate local coal supply has started impacting negatively on power generation. The Zimbabwe Power Company (ZPC) admitted this week that its coal stocks were fast dwindling due to inadequate supplies that have seen the Harare Thermal Power Station temporarily shut down.
Why should this be happening to a company that has received so much support from the state? HCCL should not be complaining of ageing equipment and Zimbabweans deserve a clear answer pertaining to the issue of this Belarus equipment.
Management should account for its defects to the taxpayers and engage their suppliers since the equipment has failed to work way before meeting its stipulated guarantee period.
We urge the government to urgently intervene and get to the bottom of this matter to prevent a further deterioration in the situation that could hurt other sectors of the economy. It would be an embarrassment for Zimbabwe to run out of coal despite vast reserves of the resource.
“Things aren’t good at Hwange Colliery. The company is struggling to sustain daily production. We’ve just been given $120,000 for fuel by ZPC to ensure that we don’t stop operations,” said a reliable source from the company who requested anonymity for fear of internal reprisal.
The company has admitted technical insolvency in its annual financial report for the year ended December 31, 2015, with figures indicating it was approaching a point of certain bankruptcy.
Concerns over alleged mismanagement of the company and corruption in procurement issues have also tainted the image of the company. We feel management should come out clean on these issues and project a positive image of the company to investors and its stakeholders.
HCCL is saddled with liabilities of about $300 million with no matching debtors. As a result the bulk of its properties including the newly imported machinery have been attached by creditors, robbing the company of critical resources it needs to remain afloat while some has been auctioned at the Harare and Bulawayo offices.
There are fears the stripping and selling of company assets might continue and intensify as more creditors obtain court orders against the company.
We also urge the government to look into the matter closely to ensure protection of company assets and avert a possible total collapse of the company.
This could render thousands of workers jobless and compromise the livelihoods of scores of businesses and families who depend on the viability of HCCL.
We concur with economic experts that in the absence of HCCL, the country could be headed for a coal supply crisis. This is because competing coal producers such as Makomo Resources and Chilota do not have the capacity to meet local demand as they do not have adequate equipment for underground mining, which requires more capital investment.
We also implore the High Court to conclude the judicial management ruling which is being sought by workers in a bid to stop litigations and save the firm from going into liquidation.
Online Reporter