adminBULAWAYO-based textile firm Merlin requires a minimum capital injection of $1.2 million to survive insolvency, the company’s judicial manager has said.
The firm was placed under provisional judicial management for the third time in December 2011 since its establishment in 1954 after it failed to address working capital constraints and labour challenges.
The company’s woes were made worse by competition from cheap imports.
At the time, Merlin employed 253 workers and was operating at 20 percent capacity.
Judicial manager Dr Cecil Madondo of Tudor House Consultants said the textile firm required a further $2 million in long term capital to bring the total investment needed to $3.2 million.
“Merlin requires $1.2 million in the short term and about $2 million,” he said.
The breakdown of the short term expenditure shows that the company requires $755,000 for raw materials, $250,000 for operating costs, $97,730 for consumables, $73,260 for weaving plants, over $50,000 for repairs and $16,000 for plant spares.
The firm has since applied for a $1 million bail-out under government’s $40 million Distressed Industries and Marginalised Areas Fund (Dimaf) through the Central Africa Building Society.
Some firms have of late secured working capital under Dimaf this year, with a total of $24.7 million having been disbursed between January and October.
Bulawayo, once the country’s industrial hub, is now a shell of its former self as most companies such as Merlin have either shut down or relocated operations to Harare.
Dr Madondo, who was appointed to revitalise the firm in May 2012, said the challenge most companies placed under judicial management faced was under capitalisation.
Banks were however not willing to risk by bailing out some of the firms which resulted in them being liquidated.
He said the resuscitation of the company would be vital “not only to maintain jobs but also directly create other employment opportunities and more importantly to make a national contribution to the Gross Domestic Product.”
The textile firm has the capacity to employ over 1,000 people when operating at full capacity.
Merlin has a total debt of $4.3 million, of which about $1 million is owed to workers and the remainder to various service providers as well as rentals arrears.
Bulawayo businessman Delma Lupepe was the majority shareholder in Merlin.
Merlin was first placed under judicial management in 1992 and came out of it in 1996 but failed to remain viable and was in 2000 placed under management of a judicial manager again.
Liquidity challenges being experienced in the economy have resulted in many companies facing viability challenges with an increasing number facing liquidation. – New Ziana.
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