The Cotton Company of Zimbabwe Limited (Cottco) has been placed under voluntary corporate rescue in an effort to prevent collapse of the struggling state-run entity.
Grant Thornton Chartered Accountants’ Farai Chibisa and Ian Mtetwa have been appointed as corporate rescue practitioners. They are expected to oversee the restructuring process and work toward restoring the company’s financial stability.
Voluntary corporate rescue allows a financially distressed company to seek legal protection while reorganising its debts and operations, rather than proceeding directly to liquidation.
As details emerge, a notice was issued to affected parties on 30 April confirming that the company’s board resolved a day earlier to place the business under supervision in accordance with the Insolvency Act.
Board minutes accompanying the resolution reveal that directors acknowledged the company’s worsening financial position, stating that Cottco was finding it increasingly difficult to meet obligations to creditors when payments became due.
According to the board, the company’s problems stem from acute liquidity shortages, inadequate working capital, mounting debt, and delays in paying cotton farmers. These difficulties have reportedly led to growing arrears owed to producers, reduced output, and continued dependence on government-supported input programmes.
In an affidavit submitted with the application, board chairman Sifelani Jabangwe said the directors convened urgently after several creditors began pursuing debt recovery measures against the company.
Jabangwe said the rescue process was intended to safeguard the company’s operations and assets for the benefit of shareholders, employees, suppliers, communities, and other stakeholders.
Although the company is under severe financial strain, the board expressed confidence that recovery remains possible.
Directors noted that Cottco still possesses substantial infrastructure, equipment, immovable assets, and industry expertise that could support a turnaround strategy.
The board also indicated that the rescue framework would provide an opportunity to halt further deterioration of the company’s financial position while restructuring efforts are undertaken.
Cottco’s move comes amid mounting scrutiny from the Mutapa Investment Fund (MIF), the sovereign wealth fund responsible for overseeing the company.
Speaking before Parliament’s Industry and Commerce Committee earlier this week, MIF chief executive officer John Mangudya criticised the company’s governance standards, particularly the absence of properly audited financial records.