RioZim workers seek corporate rescue proceedings for company

Martin Kadzere

RioZim Limited’s workers have filed a High Court application to have the company placed under corporate rescue to avert the potential liquidation of one of Zimbabwe’s diversified resource firms.

Represented by the Zimbabwe Diamond & Allied Minerals Workers Union (ZIDAMWU) and joined by two other employees from RioZim’s subsidiaries, the workers argue that failure to implement remedial measures such as corporate rescue may lead to the undesirable liquidation of the company.

Corporate rescue is a process aimed at reviving a financially distressed company.

The process provides a temporary moratorium on legal proceedings against the company, allowing a business rescue practitioner to develop and implement a plan to return the company to solvency.

Prominent lawyers, Mr Wilson Manase and Mr Knowledge Hofisi have been nominated as rescue practitioners.

Court documents reveal that RioZim, listed on the Zimbabwe Stock Exchange (ZSE), faces severe liquidity issues, with current liabilities exceeding current assets by approximately ZiG 1,04 billion and total liabilities surpassing total assets by ZiG149,2 million as of June 30, 2024.

The company is struggling to meet financial obligations, including US$5,5 million and ZiG9 million in regulatory and contractual commitments.

This has led the Zimbabwe Revenue Authority to suspect financial impropriety and demand the company’s asset register. Critical services like electricity have been cut off at the Renco Mine due to a US$4,7 million debt.

Furthermore, RioZim owes US$5,6 million in outstanding salaries and faces numerous labour disputes.

Given the company’s negative equity of ZiG149,2 million and declining performance, including a drop in gold production despite global price increases, the situation is unsustainable and necessitates intervention to prevent collapse.

RioZim also faces significant legal challenges, including criminal charges from the tax authority and the Mining Industry Pension Fund, a US$30 million commercial dispute, and a US$55 million debt to an associate company.