adminJudicial manager Mr Christopher Maswi, in a report tabled before the High Court recently, said liquidation was the only way out for the group as a previous attempt to raise fresh capital from shareholders in 2011 to recapitalise the business failed.
An application for funding to CABS under the Distressed and Marginalised Areas Fund was also rejected.
Dimaf was set up to help resuscitate companies facing financial challenges.
Steelnet, which owns Tube and Pipe Industries, BMA Fasteners and Hastt, owes creditors more than $8 million while its assets have been valued at almost $10,9 million.
“Based on the evaluation of current performance trends, inability to raise working capital, inability to raise equity from shareholders, the accumulation of debt mainly salaries and related debts, utility bills, I recommend that the business files for liquidation and the three businesses sold to pay the creditors,” the judicial manager said in the report.
The group has also not been remitting statutory obligations to the Zimbabwe Revenue Authority and the National Social Security Authority.
A commercial bank is owed $1,4 million.
The judicial manager said apart from paying off creditors, the group required $3,9 million to recapitalise its operations and improve production.
Tube and Pipe Industries, which was the group’s flagship, required $1,9 million capital injection while Bulawayo-based BMA Fasteners needed $702 000 and Hastt would be out of the woods with fresh capital of just over $1 million.
Tube and Pipe Industries makes metal pipes, tubes and sheets while BMA Fasteners produces nails, bolts, nuts and underground rock support. Hastt Zimbabwe is a maker of tractor and ox-drawn agricultural implements.
Mr Maswi said despite challenges facing the group, it was still viable if capital could be raised.
“The business viability as indicated in the viability assessment is still there for all the three businesses.
“The main challenge is the availability of adequate working capital to increase activity to viable levels. BMA and Hastt operations have been operating on the basis of customer funding and limited supplier funding. These funding structures have assisted in maintaining core skills and maintain presence in the key market segments,” he said.
He also recommended that since the group comprised three divisions that operated in different market segments, the companies could be sold separately.
The group which employed 273 people before being placed under judicial management now has a staff complement of 216 due to resignations, deaths and retirements.
Steelnet was formed in 2002 from the unbundling of the Africa Resources Limited.
A number of listed and unlisted companies have been placed under judicial management in recent years after facing challenges brought about by dollarisation of the economy.
Apart from a liquidity crunch, which resulted in shareholders failing to inject new capital to recapitalise operations, local companies have faced stiff competition from imported products.
Many companies are being forced to fund operations from short-term loans.
Companies which have been placed either under judicial management or liquidated in the past few years include Archer Clothing, Ascot Clothing, Cairns, Interfin, Redstar and David Whitehead.
Bongani Ndlovu
Online Reporter