The Zambia Privatisation Agency is pleased to announce the sale of the Government's 86% shareholding in Nkwazi Manufacturing Company of Zambia Limited to a longtime minority Shareholder and business partner, Mr M.K. Patel.
The Government's shares have been sold for a cash price of K 100 million in a transaction which excludes 10 of the company's 14 residential and commercial properties situated in Kafue, Chilanga and Kashikishi.
The entire purchase price is earmarked for the settlement of various claims on the company which were discovered in the later stages of privatisation.
Mr M.K. Patel, a minority shareholder of 28 years exercised his pre-emptive rights to buy the Government's share holding in the company. The other minority Shareholders, Anglo-American Corporation and Mr JPC Davis have consented to this sale and are willing to relinquish their share holding on terms and conditions to be negotiated with Mr M.K. Patel.
Nkwazi is in tranche-1 of the Privatisation programme. The company was first offered to the minority shareholders in 1993 but the counter-offers were not accepted by the ZPA. Later, the Government designated the company as a potential "Management buy out (MBO)".
After evaluation and negotiations with the Independent negotiating team led by Mr Mebelo Mutukwa, the MBO bid was found to be short of achieving the larger objectives of privatisation of the company.
MK Patel's revised bid and subsequent negotiations led to the conclusion of the Sale Agreement with him.
Nkwazi is situated in Kafue and specializes in manufacturing fish nets, twines, ropes. The company has been saved from imminent terminal deterioration and liquidation. By the end of August, 1995, the operations and financial position of the company had drastically deteriorated to an extent whereby; production had come to a standstill, majority of the 130 labour force were on forced un-paid leave since April, 1995, while some employees retrenched in December, 1994 remained unpaid.
Drastic over-employment has always been a problem at Nkwazi. Worse still, creditors intensified efforts to recover their dues and threats of liquidation with its catastrophic economic, financial and social consequences were real.
The company's loss before tax for the year ended 31st March, 1995 amounted to K 156 million and this continued to worsen during the period from April, 1995 to August, 1995.
The ZPA has had to find additional resources to pay employees and large creditors making this a liquidation avoidance privatisation rather than one aimed at getting one off cash resources into the Privatisation Revenue Account. This was done in recognition of Nkwazi's potential to contribute to long-term revenues to the Government in form of taxes from growing and profitable operations.
ZPA accelerated the handover of the company to Mr MK Patel, on an interim management contract effected on 01st September, 1995 so as to promote the larger objectives of avoiding imminent liquidation, providing for viable company turn around and to lay foundation for a growing, profitable, competitive regional enterprise.
Since takeover, Mr MK Patel has achieved encouraging results; stemming losses, isolating and redefining the financial picture, restarting and maintaining a steady increase in production, retaining about 40 employees and introducing an aggressive marketing strategy which should see Nkwazi develop into a key player in the regional fishing industry.
The new owners of the company have mapped out a plan of revitalizing Nkwazi which includes; an investment of approximately K 180.0 million in working capital within the next 18 months and investing about US$ 200,000 in the replacement of existing plant and machinery in the next few years.
It is believed that these investments will help transform Nkwazi into the regional market leader and provide employment to over 60 people.
The basis for revitalizing the company has already been demonstrated and the company will quickly turn around, operate viably and efficiently contribute to national development.
The ZPA is pleased once again that it has managed to stave off the liquidation of an enterprise whose continued existence is vital to the town of Kafue and important to Zambia's manufacturing base.
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