Hwange Colliery in eye of a storm

Tendai Mugabe Senior Reporter
Hwange Colliery Company is embroiled in a shady deal where it was wrongfully awarded a special coal mining grant belonging to another local mining concern, Lokalize Investments, whose application was approved by the Government under Grant Number 5539.

The former was then controversially awarded rights to the same piece of land under Grant Number 4764, but failed to utilise them within the three-year work plan which expired on July 30, 2018.

This comes amid revelations that Hwange Colliery is insolvent and owes the Government in excess of US$150 million. Further, it is understood that the firm is dogged by several corporate governance infractions and Government is seriously considering a reconstruction exercise to swing it back to profitability.

With regards to the grant, it is not clear how Hwange Colliery was awarded the special grant that had been awarded to another company.

The Herald is in possession of detailed correspondence between the Mining Affairs Board and Lokalize Investments informing them that their application had been successful.

In turn, the Mining Affairs Board asked Lokalize Investments to pay US$100 000 to process the special grant and The Herald is in possession of the receipt confirming proof of payment.

While Lokalize Investments awaited to be issued with the special grant certificate, it received a letter from then Mines and Mining Development Minister Walter Chidhakwa informing them that their special grant application had been unsuccessful.

It later turned out that Hwange Colliery had been awarded rights to the same piece of land, but failed to utilise them within the three-year lease of life that expired on July 30, 2018.

The Herald has it on good authority that Hwange Colliery unsuccessfully applied for a renewal for the special grant.

Strikingly, Lokalize Investments had given an undertaking to immediately move and start operations within a six-month period if given back its special grant.

A source privy to this matter who spoke to The Herald last night said: “The renewal of the special grant in favour of Hwange Colliery was denied for two reasons. Firstly, considering that it had been wrongfully allocated to them and that the work they did over the three years they held the special grant is far inferior to what they were supposed to have done.

“The Ministry (of Mines and Mining Development) is driving 2030 Vision of transforming the economy into a middle-income status and expects all assets to be productive so as a result whether you are 100 percent owned or you are privately-owned, the view and stance of the ministry is that if you don’t utilise the asset, it is going to be taken away from you.”

Another source said Hwange Colliery was not performing well financially.

“There has been a big deterioration at Hwange Colliery judging by their published accounts because it’s a corporate company,” said the source.

“Based on the accounts as at December 2017, compared to the accounts as at June 2018, which are the last two recorded state of accounts, there has been a big deterioration in the fortunes of the company. Post June 2018, there is no access to their accounts but there are indicators of further deterioration as evidenced by the following, one, they have missed payment of scheme creditors, two, they have started lagging behind in paying employees and thirdly it is understood that payment to Motor Angel who is the largest contractor supplying the largest significant quantity of coal has fallen behind.”

The Herald is also informed that the company’s board had been refusing dissolution and had been stiffened by one shareholder who is positioning himself to buy the company for a song.

Legal sources who spoke to the Herald yesterday said given the state of affairs at the company, Government which owns the largest single block of shares in the company put at 42 percent was extremely unhappy with this show of defiance (by the board) which fails to fulfil its oversight role and has thrown Hwange Colliery in a state of insolvency apart from the fact that Hwange Colliery owes Government millions of dollars.

“Simply on the basis of debt to Government, evidence of mismanagement, Government can put Hwange Colliery under reconstruction in which case the board will stand dissolved to make way for rehabilitation of the company,” said the source.

“That is an option open for Government.”

A senior manager at Hwange frustrated at the way how the company was being managed said: “The reconstruction principle which may be considered by Government works in three principles. The first principle is that Government has to be owed money, the second works on the basis that there company is insolvent and the third principle works on the basis that if properly reconstructed, the company can turn around the fortunes and Hwange fits in all those three. Firstly, because it owes money to Government in excess of US$150 million, secondly its liabilities far exceed its assets and thirdly it’s a good asset which if properly run, should be able to operate profitably. “Therefore, based on that, there is merit in having the company reconstructed.”

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