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DWS goes at K73m
By
Ephraim Munthali - 26-05-2003 |
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The Privatisation Commission (PC) has announced that it has sold textile giant David Whitehead and Sons (DWS) at K73 million (US$786,289) after turning down a higher offer three years ago.
Commission executive director Maziko Sauti-Phiri told journalists in Blantyre on Monday that the purchase price covers all DWS’s properties, machinery and equipment, stocks and intellectual property rights.
He said Mapeto (DWSM), as the company will be known from now, is acquiring the assets free of accumulated corporate commercial liabilities and that the new owners will also be free of accumulated government and shareholder indebtedness.
The textile dinosaur has debt stocks amounting to K1.2 billion which Sauti-Phiri said government, in consultation with the PC, will have to find ways of settling.
Government is expected to spend K140 million in terminal benefits over 1,500 people who were fired from the fallen parastatal.
Ironically, two companies—Crown Fashions Limited and BIS Trust — offered K90 million (US$2 million) and K50 million (US$1.1 million) in 1999 respectively but the commissioned dismissed the offers as too little.
“This is a fair deal because DWS is worth zero. Actually government would have had to pay the investor for any one to buy DWS,” said Sauti-Phiri.
Bob Martin, a consultant from Economic Services Limited who was PC’s economic advisor on DWS, said the low price came about because the plant and machinery are in scrap form and that the properties are not worth much.
Established as a subsidiary of Lonrho Malawi Limited in 1967 to serve the domestic market and to take advantage of export opportunities, DWS has sailed through financial problems since the 1990s.
From a giant that was producing 33 million metres a year of dyed and fabric, plus moderate quantities of yarn and twine for the domestic market, DWS was reduced to a small scale producer of 1.6 million meters.
Experts say a number of factors, including the liberalisation of the textile market, Lornho’s pull out from the company and the shifting of textiles production from Europe to East and South East Asia, contributed to the financial problems DWS has been facing.
DWS, one of the largest textile producers in East and Southern Africa, failed to withstand the pressure from these radical changes, forcing it to trim staff, resulting in shrinking profits and cash-flow.
Government later started pumping K20 million a month into the company for its operational costs, a move that attracted criticism from economists, donors and business captains who demanded that it be privatised.
It was put out for sale in 1996 but the deal flopped at the last minute and was later on advertised in 2000 and received two bids—the consortia of Mapeto Wholesalers/Jimtex and Kabula Yarn and Textiles/Weizman and the former succeeded.
Mapeto and Jimtex, who will own 60 percent and 40 percent respectively, have indicated in their business plan submitted to the commission that their company intends to invest K104.25 million (US$11.25 million) as part of its rehabilitation and expansion expenditure.
According to the PC, once the new owners start operating in the next three or four months, fixed employment is expected to 3,000 to 4,000 over five years from the current 200.
Mapeto (DWSM) has also indicated that it intends to gin and spin at the Salima factory which is part of DWS.
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