SMM Holdings Zimbabwe has shut down its mining operations, Shabanie and Mashava, six years after government annexed the assets from business tycoon Mutumwa Mawere through a reconstruction order, alleging that the company was state-indebted and insolvent.
The group’s flagship, Shabanie Mine, shut down last month and wielded the axe on nearly 1 500 employees, save 72 artisans who have been retained to fight shaft floods that crippled underground mining operations last year following a power-cut by Zesa as arrears ballooned.
Mashava Mine was the first to grind a halt last year.
SMM Holdings Zimbabwe administrator Afaras Gwaradzimba in an interview on Tuesday said “shutdown” was “inappropriate” as a description of the cessation of operations and preferred to talk in terms of “suspension of the operations of the mine pending recapitalisation”.
“SMM has not shut down. How can it shut down when I, its administrator, am at work?” Gwaradzimba asked.
“Let’s understand facts here. First what is shutting down? Is it the machines or the operations? The machines have stopped working because the mine needs working capital to continue operating. But it doesn’t mean the operations have stopped.
“So, it’s inappropriate to talk in terms of a shutdown because other processes are taking place as normal, but in terms of suspension of the operations of the mine pending recapitalisation.” Gwaradzimba said
SMM Holdings Zimbabwe required at least $10 million to restart the mines and settle creditors and other liabilities, which include outstanding salary arrears and other outlays.
About 3 500 employees of the two mines have taken the company to court, claiming that they have not been paid consistently since December last year.
Government, through the agency of Justice Minister Patrick Chinamasa, placed SMM Holdings Zimbabwe on “reconstruction” on September 6 2004, managed by an administrator, Gwaradzimba, whose core assignment was to “bail out” company and settle creditors who included the “state”, banks and suppliers.
Two months later, the administrator produced a scheme of reconstruction laying out the rescue plan, which included two government financial bail-outs worth $1,5 billion, allegedly committed to working capital and outstanding obligations to creditors.
Paradoxically, as the turnaround got under way, the company sank further into debts, aggravating it’s financial and operational problems, eventually culminating in the shutdown.
Asked to evaluate his scheme of reconstruction, widely seen as having taken SMM Holdings Zimbabwe from a going concern to ruins, vis-à-vis the time taken to “mend” the company, Gwaradzimba said his “job” has been disturbed by several interferences from Mawere.
“The time taken is there for everyone to see,” Gwaradzimba said.
“Whether it has taken too long, it’s someone’s perception. What I know is that there have been too many (court) cases, about 25, filed by Mawere. The cases have delayed the reconstruction of SMM (Holdings Zimbabwe) and I have had to amend the scheme of reconstruction.
“I completed the (first) scheme of reconstruction in November 2004 and recommended that the company needed to be financed by government. Government provided working capital funding to pay off local creditors and bank loans. SMM (Holdings Zimbabwe) had borrowed from every bank here.
“I had to amend the scheme of reconstruction. I completed the final amendments in 2008.”
Gwaradzimba said the revised SMM Holdings Zimbabwe rescue plan entailed courting investors to refinance the company and technically assessing whether to “remove the company from reconstruction” or to liquidate it, subject to certain conditions.
The reconstruction steps include the establishment of the “state-indebtedness” of SMM Holdings Zimbabwe, determination of the “insolvency” of the company, preparation of the “scheme of reconstruction”, “implementation” of the scheme of reconstruction, indentification of culpable persons, preparation of the final report, appointment of an interim board and recommendation of SMM (Holdings Zimbabwe)’s removal from reconstruction.
Gwaradzimba said the revival programme had reached the “implementation of the scheme of reconstruction” phase, which would determine the fate of the company.
In January 2006, the administrator took SMM Holdings Zimbabwe’s non-mining subsidiaries out of reconstruction and paved the way for the companies to operate with independent boards.