ZIMBABWE – International suppliers of crude oil for the manufacturing of cooking oil have closed the tap on one of Zimbabwe’s biggest cooking oil manufacturer, Surface Wilmar following its failure to settle legacy debts.
Lack of a clear plan to settle legacy debts ring-fenced by the Reserve Bank of Zimbabwe (RBZ) has left most local companies technically insolvent and facing the danger of hostile foreign takeover by foreign suppliers.
Surface Wilmar executive chairman, Narottam Somani told Business Times that suppliers of raw materials have since closed their tap and survival was now hinged on cash deals and negotiating which is rather not sustainable for running a business.
The situation will likely plunge the country into another biting cooking oil crisis due to raw materials shortage as at the moment is already battling mealie meal shortages.
Presenting the Monetary Policy Statement this week, RBZ Governor John Mangudya, said the central bank during the course of 2019 rejected legacy debts amounting to US$861 million for lack of proof and proper documentation.
He said RBZ has so far approved US$1.2 billion worth of legacy debts which will be spread out over a period of time.
In addition, some foreign suppliers are even proposing debt to equity arrangement as they frantically look at recovering the legacy debts because of glaring lack of a legally binding agreement between RBZ, foreign supplier and the local companies on the settlement of the debts.
The cooking oil industry has been the hardest hit as companies like Surface Wilmar which owns Olivine and Chitungwiza-based Surface continue to face viability problems.
In the February 2019 Monetary Policy Statement (MPS), Mangudya announced that all foreign liabilities or legacy debts due to suppliers and service providers shall be treated separately after registering such transactions with Exchange Control for the purposes of providing the Bank with sufficient information that will allow it to determine the roadmap for orderly expunging the legacy debt.
This move by the RBZ to ring-fence and delays in the laying out of a settlement road map has posed a massive challenge to productivity as most suppliers of raw materials are now holding on to their products.
Indications are that some foreign suppliers especially in the cooking oil industry have made it clear that they will not continue supplying raw materials if a clear plan on settlement of legacy debts is not set out.