New Lease of Life for Davis Whitehead as order for provisional liquidation is withdrawn

By Staff on Oct 31, 2009 with Comments 0

David Whitehead Textiles Ltd (DWTL), Zimbabwes largest surviving textile company, has been offered a new lease of life after an order for provisional liquidation was withdrawn from the High Court on Thursday. This gives hope that 1 400 jobs which were under threat would be saved. As a way forward, it is highly probable that another judicial manager would be appointed, which would be the second time this has happened in less than two years. Another judicial manager, handed the company back to new management less than two years ago after he had completed the firms turnaround. Management at DWTL filed for provisional liquidation at the beginning of this month saying it could no longer meet its obligations including paying wages after the National Employment Council for the textile industry raised wages by 66%. An increase in electricity costs compounded the companys financial difficulties since it is a heavy consumer of power. Madondo was appointed the companys judicial manager in May 2006 and two years later he had completed laying the groundwork for the resuscitation of operations at the firm. It is unfortunate that his recommendations were not implemented when new management took over at DWTL in May last year. To make matters worse, there is a shareholding dispute which is likely to hinder progress towards reconstruction of the firm. In May last year the textile firm was on its way to recovery with Madondo publicly stating that it was a viable business. DWTL is a viable textile giant with very strong asset base, sound market share, massive plant and machinery, highly skilled manpower and distinct and sustainable competitive advantage in the textile industry in Zimbabwe and beyond, said Madondo is documents in possession of Business Zimbabwe.

David Whitehead Textiles Limited is a Zimbabwe-based company. The Company is engaged in textile manufacturing and operates through four divisions: Head Office at Harare, Weaving and Finishing at Chegutu, Spinning at Kadoma and Hosiery at Gweru. David Whitehead Textiles offers cotton textiles for Clothing, Uniforms for Healthcare and Armed forces, Workware, Furniture, Camping, Medical and Hygiene Industry.

Investor plunges David Whitehead into uncertainty Saturday, 18 June 2011 22:05 Business By Mike Chimombe in Chegutu KITHRA Enterprises, an investor that had been brought in this year to run David Whitehead Textiles in Chegutu after it went into judicial management again, has pulled out barely six months after taking over, plunging the textile giant into uncertainty. The new investor pulled out of David Whitehead Textiles, terminating its oneyear lease deal with the troubled company. Kithra Enterprises terminated the contract amid revelations that former DWT chief executive officer Mr Andrew Toendepi has been harassing Kithra Enterprises, demanding rent as he claimed to be in charge of the company. In March, Kithra Enterprises filed an urgent High Court application seeking to prevent DWT directors from interfering with its operations. The court documents filed by Kithra Enterprises said DWT chief executive officer Mr Toendepi and his finance director, Mr Zivanaishe Mangena, were interfering with the performance of their lease contract. Kithra Enterprises was contracted by the Zimbabwe National Army to produce and supply 150 000 metres of camouflage material. It then entered into a oneyear lease deal with DWT. The deal is worth US$700 000. According to the agreement, Kithra Enterprises is required to supply 15 000 metres of camouflage material every week. David Whitehead Textiles staff said Mr Toendepi is behind the pulling out of Kithra Enterprises and has dismantled most of the companys machinery, which he allegedly sold in South Africa as scrap before stashing the money. The workers, who were milling around the company premises in Chegutu and Kadoma depots on Tuesday last week as the gates were locked, told this paper that they stopped working at the beginning of this month because their

contractor had not paid them their May salaries and at the same time they were told that he had terminated his contract to run the textile giant. The company had been placed under judicial management with Mr Winsley Militara overseeing operations since December where he brought with him Kithra Enterprises on a year-long contract to manufacture camouflages for the Zimbabwe National Army, said managerial workers committee chairman Mr Ezekiel Mutingwende. He alleged that it was an open secret that Mr Toendepi was the root of the rot threatening the collapse of the countrys largest textile manufacturer. Both managerial and non-managerial committee members lamented Mr Tondepis management style, arguing that Mr Toendepi, who had been at the helm of selling company machinery, had no right to do so whatsoever as the machinery was vital for production at David Whitehead factories. They said Mr Toendepi, who was removed from running the company operations, was trying to come back through the back door, as he was demanding rentals from Kithra Enterprises. It is an open secret that Mr Toendepi was booted out of the company after he sold all working and non-working machines from factories as scrap metal in South Africa. There is evidence that he sold metal scaling of over 1 000 tonnes worth more than R1,5 million at the companys expense, revealed the workers committee organising secretary, Mr Francis Mutambanashe. Mr Mutambanashe said most of the equipment at Harare, Chegutu, Kadoma and Gweru factories was removed and smashed into scrap metal before being transported to South Africa where the metal would be melted in search of iron, brass and aluminium, among other minerals. He said it was also on good authority that Mr Toendepi also sold the company bus, a number of cars and electric cables during his reign as chief executive officer. He removed all electric cables in February last year at the Gweru factory before taking more than 100 machines used for manufacturing socks, explained Mr Mutingwende. He added that 13 of the machines were missing with the rest lying idle at the Chegutu plant while most of them used in the plant were vandalised leaving the factory in disarray. He said Mr Toendepi came to DWT in May 2008 as an investor under Elgate Investments. He then pledged to inject US$5,4 million, which was to be

deposited with the Reserve Bank of Zimbabwe. It had since turned out that that money was never deposited as pledged. The workers also revealed that during his campaign to become the chief executive officer of the company, allegations of bribes being paid to the workers union were unearthed. One of the people who was named in the bribe scandal was the workers representative, a Mr Masimba Guyo, who was given eight cows so as to campaign for Mr Toendepi as well as spy out those who would be raising questions on Toendepis wayward running of the company, claimed vicesecretary for the non-managerial workers committee, Mr Fidelis Chimusepa. He said as proof that bribes were paid to workers representatives for Toendepi to get the post of chief executive officer, he even scored 54 percent votes from the workers against an 80 percent vote cast for a company called ZOE Electrical Installations owned by Gaborone-based businessman Mr Kumbirayi Mangwanda, which was among the bidders to run David Whitehead. The actions by Mr Toendepi in stripping company machinery were an act of sabotage. How could he remove company machinery, which has been in use for more than 40 years, and turn it into scrap metal? He is even trying to come back through the back door as he is threatening the new investor, said a worker, Mr Tabo Time. Mr Time said such deeds should not be condoned because employees were losing out as nothing was being left behind to continue manufacturing. What also astonished the employees was the fact that not even the responsible minister had come to witness the abuse of power despite several appeals having been made. We wonder if our problems would ever be resolved. The only minister who has tried to intervene is Cde Webster Shamu, who toured the company after which he even warned us that Toendepi was not capable of running such a big company, said Mr Time. Because of the looting of the assets, some workers say they were forcibly transferred from the Gweru factory to Chegutu since there was no machinery in Gweru as it was being transported to various destinations. Efforts to get comment from Mr Toendepi were fruitless, as his mobile phone was not reachable while Mr Militara said the issue was before the courts. It is understood that Mr Toendepi has gone into hiding after the arrest of his friend and DWT finance director, Mr Mangena, who is facing charges of theft of

company property which includes a bus, cars, milling machines and a compressor. A total of 45 employees were transferred from Gweru in February last year without being given any relocation allowance as promised. We are now living like beggars as we have no money to support our families and ourselves. It is understood that employees were living like mice as eight people were being forced to share in a single room at the Chegutu plants compound. There were also fears of disease spreading in the compound, as there is no running water. The workers lamented the return of the previous judicial manager, Mr Cecil Madondo, who ran the firm from 2006, saying he managed to restore the companys image where production levels rose to 55 percent. Mr Madondo ran the textile giant for two years after it was put under judicial management following failure by the then chief executive officer, Mr Edwin Chimanye, and his team. We appeal to the powers that be to quickly re-engage Mr Madondo as he was capable of purchasing the raw materials required for the industry to function. The textile industry only requires lint, coal, polyester, wool and dyes, but Mr Toendepi failed to secure these and yet he claimed to have injected US$5,4 million. This is where the suspicion as to whether he indeed injected that money into the company or not was raised. Workers said it would be appropriate if the Head of State and Government and Commander-In-Chief of the Defence Forces President Mugabe visited the plants as all other avenues to have the problems bedevilling the textile giant have been exhausted. Equipment that has been lost at Whitehead Textiles cannot be easily replaced. Chegutu plant is the largest fabric manufacturer with Kadoma being a spinning factory while the Gweru plant is the hosiery department for manufacturing socks. Unfortunately all these plants are not functioning following the removal of the machinery. The workers also questioned why the Minister of Finance, Mr Tendai Biti, was not financing such huge industries when he was prepared to bail out a bank which does not even employ half of the textile industrys employees.-The Sunday Mail Comments

0 # Emotions 2011-06-19 15:41 It is very clear to me that the issue of DWT has not been handled properly. Long time ago we heard the judicial manager was looking for an investor with deep pockets to resurrect this textile giant. Should we say Toendepi and co are the investors we have been waiting for all these years? I have seen a trend in Zimbabwe where unscrupulous individuals "buy" companies and later strip them of assets. I am dismayed by this behaviour. Let us be aware that even you buy DWT, ZISCO, APEX etc you are still answerable to communities in which you operate. Why do we allow such disgusting behaviour simply because its a black brother misbehaving? A wrong is a wrong no matter who is committing the wrong? I urge the ministers responsible to devise a strategy of either recapitalize this company or to sell the majority stake to investors with capacity to turn around this company. I'm sick and tired of lack of decisiveness regarding this national asset!!!

Settling for sub-standard products

Johannes Munyanyi owns a clothing, phone, television and radio boutique in Harares Central Business District along Chinhoyi Street. He drives an E Class Mercedes Benz and wears a threepin striped Giorgio Armani suit and shoes.
20.09.1105:52pm 1 0

by Seven Nematiyere Email Facebook Twitter Print

Second hand clothing for sale in Bulawayo.

An unemployed, political science graduate walks into the shop hoping to buy a battery for his phone. The shop assistant sings the benefits of the US$5 batteries that they sell, but the youth knows that the product will last him a few months at most.

Products from China and Dubai have come as a great relief to most of us who live on less than US$1 a day because we are unemployed. The Presidents Look East policy has brought smiles to our faces because we can now afford products that used to be reserved for the rich, said Alfred Mumbire, an IT technician from Zengeza. Even my mother in Simuchembu owns a cell phone. It only cost US$10 for the phone and US$1 for the sim card. There have been some great strides in the development of information communication technology in Zimbabwe. While Mumbire had nothing but praise for the availability of Asian products, Rogers Maurukira was a bitter man after purchasing a t-shirt and a pair of trousers in a Chinese shop for only US$3. I wore my clothes for one day to attend church. The following day I washed the clothes only for the t-shirt to come apart in my hands. The trousers were bleached and the water turned blue. I realized that I had not saved anything by going for these cheaper items since I had lost my clothes overnight, said Maurukira. The Zimbabwean textile industry has been hard hit by the influx of cheap clothing from China with manufacturing firms like David Whitehead Textiles left with no option but to close their doors while businesses such as Julie White are forced to downsize. In the midst of this chaos, those who are able to import clothes from countries like China, Dubai, Mozambique and Zambia are becoming rich overnight. US$1 buys K5000 in Zambia. A good shirt goes for K15000 which translates to only US$3. In Zimbabwe, I will sell the same shirt for US$10 which means I will make a profit of US$7 per shirt, said Onward Mugova, a clothing trader. The Forbes border post in Mutare sees a lot of traffic from clothing traders bringing goods from Mozambique into Zimbabwe. While most of these clothes are second-hand, they are popular with Zimbabweans who cannot afford to buy new clothes. I bought good khakhi Dickies trousers that I wear to work for only US$2 and these shoes for only US$5 from a trader who brought clothing bales from Mozambique at Mupedzanhamo market, said a local security guard. As Zimbabweans continue to find ways to earn a living in the current economic climate, and poor quality products flood the market from China, local industries will suffer and people will have no choice but to be satisfied with substandard goods.

OPINION: It is very distressing to note the conspiracy of silence by the international community on Zimbabwes company grabs supposedly for black economic empowerment.

There is no difference between robbing a bank at gun point and threatening companies with the withdrawal of licences. Some firms have been trading under difficult circumstances to provide jobs and tax revenue when unemployment is about 85%. Since 2000, Zimbabwe dramatically turned into an importer of staple foods like maize and wheat when it used to be the breadbasket of Africa before the looting frenzy took over as the new ideology of the post-independence era. Companies whose collapse has been attributed to indigenisation are many, however prominent ones are said to be David Whitehead Textiles, Lobels Bakery, Jaggers Wholesalers, Zimalloyss Great Dyke and Inyala underground mines and many others. Looking at a snapshot of headlines since 2001, one gets a sense that there is a fundamental problem in Zimbabwe that cannot be solved overnight by lines of credit, as long as it is unresolved. That fundamental is arguably good political governance or having a stable and constitutionally elected government elected through free and fair, non violent elections, which upholds the rule of law and respects human rights and property laws. At the height of the land grab similar to what has resumed in 2011, in one year alone 400 companies folded up in 2000, of these 141 were in the motor trade industry, 92 in steel manufacture and 45 in clothing and textile industry (CZI study, Zimbabwe Independent 16/04/01). A $Z1bn Loan Facility for Distressed Companies which was described by the State-owned Herald as a noble initiative was reportedly misused leading to more firms folding up (The Herald, 05/08/03). There is a great possibility of capital flight as a result of the indigenisation regulations. Already, the Confederation of Zimbabwe Industries (CZI) is said to be battling to rescue firms as 70 companies have closed operations in Bulawayo, while Mutare, Gweru and other towns have suffered the same fate (ZBC, 21/06/11). However, there are some important characteristics of the 21st century revolutions which Zimbabwe should not ignore. One is their unpredictability, another is the classless nature of the uprisings in being waged by an angry cross section of the society including disaffected and unemployed youths, bankers, office workers, peasants, doctors, nurses, engineers, dentists, teachers, housewives, school children and so on. Nobody foresaw events now unfolding in Libya despite its high Gross Domestic Product. A third aspect is the 30 years plus characteristic meaning the revolutions are occurring in dictatorships which are 30 years old plus; where there is no respect for constitutional means of regime change through free and fair elections; freedom of expression, freedom of the press, human rights and the rule of law and so on. Another significant characteristic relevant to Zimbabwe is the communication aspect.

According to the UKs Evening Standard, the Libyan revolution has relied on word of mouth and mosques for communication unlike the jasmine revolutions of Tunisia and Egypt which were fuelled by the internet and mobile phones. That aspect is very interesting because press reports say that one of Gaddafis sons owned all the mobile networks in Libya although that was not easy to verify. In the case of Zimbabwe, despite state censorship of video footage of the Libyan uprising, the people already know that there is a possibility that Gaddafi may soon join Mengistu as the guest of Robert Mugabe. The conspiracy of silence risks driving the country further back to pre-GPA days of hyperinflation, food shortages, cholera epidemic, violence and a mass exodus of skilled people. Among diplomatic measures that can be used to register disquiet against Zimbabwe include the issuing of high level policy statements, sending of special envoys, recalling of ambassadors, sacking of the regimes ambassadors before closing embassies completely. No jobs are guaranteed by indigenisation as presently formulated. Foreign intervention should not always be preceded by civil unrest and bloodshed. The conspiracy of silence on company grabs must end. Clifford Chitupa Mashiri, Political Analyst, London, zimanalysis2009@gmail.com

Secondary bourse necessary

Sunday, 18 December 2011 16:50

Lovemore Chazingwa Business Correspondent The Zimbabwe Stock Exchange (ZSE) has in recent years been bedevilled by compulsory and voluntary delisting of former strong performers as a result of a plethora of factors, among them the liquidity crunch, mismanagement, low production and illegal economic sanctions imposed by Britain. Notable companies that have delisted from the primary local bourse include CAPS Holdings, David Whitehead Textiles Limited (DWT), Red Star and Renaissance Holdings Limited (RHL). Steelnet Zimbabwe has so far been suspended and is under provisional judicial management. The performance of our primary capital market has not been rosy as foreign investors have exited the bourse because stocks have remained under pressure. A secondary bourse may be the panacea to the viability of some of these companies whose business life could be resurrected when operating in a lesser demanding capital market. Economic analysts and commentators indicate that more companies may delist from the local primary bourse if measures are not put in place to increase production levels,

tightly monitor their operations and make capital available to those listed corporations that are finding the going tough. Equally important is the removal of hurting economic sanctions that are counterproductive and restricting economic growth. The financial services sector is also smarting from the decade-long economic crisis to such an extent that very few commercial banks are able to lend money to companies duly and adequately. This leaves the business sector with limited choice but to invent other avenues to fund their operations if they are to remain economically viable. With the National Indigenisation and Economic Empowerment policy in full swing, it will do the economy a lot of good if funds raised through the secondary bourse are injected into the ZSE. The role played by small and medium enterprises (SMEs) in the economy cannot be overemphasised. Even when the nation perceives the economy to be in a healthy state, SMEs should be supported and allowed to thrive every step of the economic way. With the foregoing, it becomes highly prudent to establish a secondary bourse for the heartbeat of the economy to return to normal. As a result, full production levels are achievable cushioned by a vibrant fall back plan. This second-tier stock exchange would be meant for small to medium enterprises and co-operatives. These operations have sustained the economy during the most difficult period from the year 2000 until 2009 when the multi-currency regime was officially introduced. Members of the public who are unable to invest their money in the ZSE-listed companies can do so in this secondary bourse. The advent of the National Indigenisation and Economic Empowerment policy should come as sweet news for SMEs. Secondary listed companies will be able to buy equities in ZSE-listed companies thereby improving their operations. Companies performing better on the secondary bourse and meeting the requisite conditions financially and logistically would then graduate to be listed on the major stock exchange, that is, the ZSE. Conversely, those organisations not performing well on the primary bourse would be relegated to the secondary bourse so that they do not crumble completely. The aim would be for them to secure funds and other resources to sustain operations and eventually be strong enough to operate on the ZSE again. The Minister of Small and Medium Enterprises and Co-operatives Cde Sithembiso Nyoni came up with the idea in recent years but the school of thought died peacefully on the drawing board. SMEs should be allowed to make investments towards the mainstream economy as they have always done, especially during the economic downturn of the last decade. This will provide a fertile production ground for the whole economy even in times of economic distress.

A sound primary bourse supported by an equally healthy secondary stock exchange will not only boost production but also attract foreign direct investment (FDI) due to confidence in the economy by foreign investors. Shareholders in the SMEs will boost production by not only relishing on the prospect of reaping large profits but also due to the added incentive to own stocks in larger companies when they eventually buy shares in ZSE- listed corporations. This trend would see more SMEs growing by asset value and liquidity while others would also come on board. Indigenisation comes in handy to support investment by indigenous people into foreign companies with huge commitments in this country, that is those investments that exceed US$500 000. With a scenario as such there should be higher employment, an increased gross domestic product (GDP), more FDI and improved liquidity on the money market. With inflation having been arrested to a single digit, there is the prospect of a higher standard of living for the generality of the population. Agricultural economist and academic Professor Mandivamba Rukuni recently highlighted that if SMEs are developed into major industries, they have the potential to earn significant foreign currency. There is need to grow SMEs into major industries able to manufacture not only for the local market, but also for export Prof Rukuni said. In South Korea SMEs make machines that manufacture consumer goods. This has the ripple effect to enhance economic growth even to double digits. Such an economic dosage is not unique to Zimbabwe alone as there are many other countries that have successfully developed their economies through supporting SMEs. These include China, India, Indonesia, Japan and Sweden. Local companies that could have been saved were victim to the aforementioned economic ills. Other companies have voluntarily delisted from the local bourse. CAPS Holdings has voluntarily delisted to restructure and seek fresh capital. Steelnet Zimbabwe was suspended from the primary capital market after the High Court granted an order for provisional judicial management. In June this year, RTG shares were suspended because financiers were closing and would not renew its credit facilities. DWT collapsed due to a shrinking balance sheet even after it went under judicial management for more than five years. It failed to raise enough capital to resume operations Going forward, a secondary bourse mainly meant for SMEs could be just the right prescription for an economy recovering from the effects of a decade-long recession and for stability in the long term.