THE judicial management system has failed Bulawayo companies and should be replaced by a more viable model that would assist ailing firms to regain their footing, the Association for Business in Zimbabwe (Abuz), has said.
Contributing during a 2018 National Budget review symposium organised by The Chronicle Business in Bulawayo Tuesday, Abuz Chief Executive Officer Mr Victor Nyoni said several companies that have been put under judicial management in recent years have remained in the red with no hope of the desired revival.
He said Zimbabwe needs to take a cue from countries such as South Africa, which has dumped judicial management and adopted more efficient industry support approaches.
“This is particularly important for ailing businesses in the city. The judicial management mechanism has been a huge disaster and we cannot continue with it. Merlin, G and D, National Blankets, Wet Blue, Belmont Leather just but to mention a few, are examples of how judicial management has failed us,” said Mr Nyoni.
“Judicial management is not the best method for Bulawayo. South Africa has already dumped the approach and Zimbabwe needs to learn from that. Something needs to be done. A new business rescue model must be found as a matter of urgency.”
Bulawayo has suffered closure and relocation of companies in recent years due to a variety of reasons resulting in job losses. A majority of surviving firms are operating below capacity, while some are under judicial management, and require funding to re-tool, acquire modern technology and boost volumes.
Mr Nyoni said some of the people appointed as judicial managers have not shown the desire to revive the companies they run. He claimed some company owners have been prejudiced or lost their shareholding because of the manner in which judicial management is enforced, which doesn’t respect owners.
During the discussion on the issue, industry and commerce executives said most companies have succumbed to judicial management due to statutory debts from entities such as NSSA and Zimra. They urged Government to review the operations of these state entities to ensure their operations complement industry viability.
In August this year, Textile Mills came out of judicial management after its creditors approved a scheme of arrangement to recapitalise the company. The firm owed an estimated $1 million to its employees and $2 million to trade debtors. It was placed under judicial management a few years ago after facing serious under-capitalisation challenges, competition from cheap imports and shortage of working capital. Meanwhile, Bulawayo Central legislator, Ms Dorcas Sibanda, urged businesses to use Parliament to lobby for the kind of changes in the legal system that they need to assist industry operations. There was also a suggestion that all business associations must form an umbrella body that would foster collective lobbying and contribute to the turnaround of the economy.