�Pula Steel can survive�
Onalenna Kelebeile | Friday March 10, 2017 15:19
The company has been placed under Judicial management by the High Court, and all orders by creditors to attach the company’s property have been suspended. However the order came after one creditor had already attached and auctioned some trucks, trailers and two small vehicles.
The Judicial manager said the company has about 100 creditors with some owed substantial amounts of money and there are eight orders from creditors to attach property, but has since been suspended.
He noted that though the company’s cash flow is on the red, Pula Steel is not insolvent unless shareholders do not want to pump in some funds. He however said CEDA is very supportive and willing to support the plant and this may make CEDA a major shareholder after BCL was placed under liquidation.
He added that the delay by shareholders to place Pula Steel under judicial management has sank it deeper into financial mess and cost the company millions of pula.
He was however thankful to creditors for their patience. He noted that they are currently banking on CEDA for the plant’s survival and there are no timelines as to when it reopens until they have capital in hand. “We have got a commitment from CEDA and it has given us confidence,” he noted.
All the 98 employees, management included, were retrenched this week. He said employees were fully consulted on retrenchment and they will be paid a month notice and that management is no longer in force but will be engaged on specific mandates.
“We did a diagnosis study of the plant in December 2016 and we discovered a lot of challenges ranging from loss of skilled expatriates as well as disconnection of electricity and the fact that the company is heavily in debts. Our intention is to reopen the plant as early as possible and to have the right kind of raw material supply,” he said.
He was thankful for the moratorium by Government that local scrap should satisfy the local market before export and said this will ensure sufficient supply. “We want to put the moratorium into use and take advantage of the metal prices that have improved in the last six months,” he said.
He however said skilled labour is also crucial for the plant to reopen, adding that the local employees retrenched this week are not super-skilled in the scrap-metal business.
Kalyanaraman said based on their input, retrenched employees will be given priority and be reemployed provided they meet all the requirements.
“We do not have the necessary expertise in the country and we will have to import some of the skills and we will look deeply into the most crucial positions and those who were retrenched on Wednesday.
“There is a huge amount of liabilities on the company and the depth of damage is heavy but we have engaged with creditors. We have stopped all auctions and we have made sure that all necessary licences are in place. Botswana Power Corporation has also assured their support to test if the plant is working though with a huge liability on their books,” he said.
He said they are partnering with creditors and they intend to re-engage them when the plant is back in operation and be able to pay. He however said creditors must know that they are not going to get all their dues.
“As long as dependency on shareholders continues, the future of the plant is insecure. Creditors must look at a bigger picture and appreciate that they will continue doing business with Pula Steel once it reopens. The Judicial management is more favourable for creditors because it gives assurance that they will be paid.
Kalyanaraman said he does not know yet how much the plant needs to bounce back to full operations because the financial statements do not give a clear picture.
There has been no production at Pula Steel since November last year and though heavily indebted and having paid nothing to BCL as the supplier of raw material, the plant is owed nothing by its customers.
He is confident that the market has improved significantly and the scrap metal is available to feed the plant even in the absence of BCL Mine. In fact, he indicated that the BCL scrap is not the quality preferred at the plant.
“I am expected to present a report to the High Court on the exact status of the plant, showing its assets and liabilities and its debt obligations and then in August, I will declare whether Pula Steel should be discharged from Judicial management or be placed under liquidation,” he said.
The company is also still under an investigation that started while BCL was still operating and the Directorate on Corruption and Economic Crime has repossessed all computers for investigations, which they hope will be brought back in a week.
Though retrenched, the former management would be engaged in the care and maintenance for internal controls and governance.
Kalyanaraman acknowledged concerns by former employees that former management should not be engaged so that creditors do not lose confidence, but said the managers have institutional knowledge. “We however need to strike a balance,” he said.