HWANGE Colliery Company Limited (HCCL) yesterday admitted being insolvent with a $69.1 million tax liability to the Zimbabwe Revenue Authority worsening its plight. In a statement accompanying its re-published unaudited interim financial results for the half year ended June 30, 2015, HCCL expressed concern at the happenings at the giant firm could cast significant doubt on its ability to continue as a going concern.
At the publication of the financial statement for the period last year, HCCL was under tax investigation by Zimra and the probe had not been finalised.
“The company had recognised a Zimra tax liability of $40.6 million as at June 30, 2015 with other amounts disclosed as contingent liabilities. However, on November 27, 2015, Zimra confirmed that after the investigation exercise, HCCL owed Zimra an amount of $69.1 million,” it said.
“The company is experiencing matters that may cast significant doubt on its ability to continue as a going concern. The company’s current liabilities exceeded its current assets by $177.1 million as at June 30, 2015.
“This unfavourable position is a result of the delayed realisation of capitalisation projects as a result of adverse liquidity situation affecting the economy.” During the period under review, HCCL experienced a negative financial position with equity of $6.9 million. A negative equity implies that a company is technically insolvent.
Economic analyst, Trust Chikohora, said while Zimra should ensure that companies meet their statutory obligations, he accused the tax collector of being heavy handed on companies.
“Given the prevailing economic climate, Zimra needs to be cautious when dealing with companies on matters to do with tax obligations. We understand that Zimra is under pressure to collect tax but that should be done with caution otherwise a number of companies, because they’re distressed, will end up closing down because Zimra is heavy handed on tax issues,” he said.
“For example, taking into consideration the financial position for HCCL, it wouldn’t be surprising to hear that the colliery has shut down unless shareholders inject fresh capital.”
Last week, HCCL workers proceeded with a court application to have the colliery placed under judicial management defying a call by Mines and Mining Development Minister Walter Chidhakwa to withdraw the application. Through their lawyer Dumisani Dube of Mathonsi, Ncube Law Chambers, the employees resubmitted their application, Case Number HC361/16, with the Bulawayo High Court which now includes the Assistant Master of the High Court as the second respondent to have the company placed under judicial management.
This comes after Minister Chidhakwa had instructed management to cut salaries by half and turn around the fortunes of the company in three months.
HCCL is sitting on a $160 million debt and its production levels are nose diving. The workers have also suggested that the coal miner must be delisted from all the three bourses it is listed on namely the Zimbabwe Stock Exchange, Johannesburg Stock Exchange and the London Stock Exchange.
They also want the court to stop all court actions and proceedings and execution of all writs, summonses and other court proceedings against the company, its shareholders, directors and guarantors. HCCL employees allege management is making decisions detrimental to the workers and suspected that it wanted to “siphon money” from the ailing coal mining company.