Ingwebu suspends Mahewu production as revenue dips …company to retrench, cut salaries

by Sunday News Online | Sunday, Apr 16, 2017 | 1606 views

INGWEBU 1

Vusumuzi Dube, Business Reporter
THE Bulawayo Municipal Commercial Undertaking (BMCU)-run Ingwebu Breweries has suspended its non-alcoholic sorghum mahewu production after raising a paltry $6 143 in the fourth quarter to December which was 91 percent down compared to the budget.

Further, the company admits to facing a number of challenges that are threatening its going concern status hence has tabled cost cutting measures that include salary cuts and retrenchments.

The company started producing mahewu in February 2015 after investing more than $500 000 as a way of raising fresh income after its main source — the sorghum beer — took a battering from poor marketing, distribution and competition from other brands.

In a report contained within a Bulawayo City Council confidential report, BMCU board chairperson Mr Moffat Ndlovu, however, noted improvements in the beer line.

“Sectorial, brewery recorded a profit of $8 213 for the quarter, which was 102,51 percent above budget and 101,49 percent above 2015, fourth quarter results. However, included in the profits is a reversal of $137 419 in payroll provision.

“Retail recorded a loss of $82 596, against a budgeted profit of  $47 841. In 2015 retail made a profit of $122 558 over the same period. The franchise business made a loss of  $381 310 against a loss of $20 524 made in 2015,” he said.

The report also read that the organisation’s current liabilities exceeded current assets.

“The first quarter of 2017 will be challenging for Ingwebu. In order to survive, the business will need to continue with cost reduction initiatives that will address both variable and fixed costs.

“Some of these initiatives include; increased focus on sales effort, 20 percent salary cut for senior managers and managerial employees, reduction of wage bills through short working hours and retrenchment, prioritised repairs and maintenance, reduced hired vehicle costs and improved product cost,” said Mr Ndlovu.

He noted that out of a total of 48 beer gardens the brewery franchised out they had since taken legal action against 20 of these after they failed to pay their franchising fee, with the debt ballooning to $120 499.

Some of the most notable franchisees that have been taken to court include the National University of Science and Technology Technopak (Masilela Beer Garden) which, as at 31 December 2016 owed $10 168 and the Bulawayo City Council’s former acting engineering director, Mr Job Jika Ndebele (Mondela and Phetsheya beer gardens) who owe  $4 903 and $41 866 respectively.

He said from a human resources perspective there was a need to explore a number of avenues that would ensure that the business stays viable.

Mr Ndlovu revealed that due to the challenges being faced by the organisation they were now four months behind in paying salaries, which thus meant a highly demotivated staff.

“Organisational performance that is currently below par has continued to impact on the welfare of employees, leading to unprecedently low employee morale. Because of the precarious situation that the organisation finds itself going through, salary delays are continuing. We are now four months behind in salary arrears.

“From a human resources perspective some measures being put in place include; wage and salary cuts. These are being discussed in works council. The need for retrenchment as one of the measures to be undertaken by the organisation to survive cannot be downplayed. A budget has been set aside for this programme to take place. The workforce has already been sensitised about the need to go that route.”

Due to the problems being faced at the brewery company — the Bulawayo City Council a couple of months ago had to engage auditors to investigate the reasons behind the impending downfall of the firm. The auditors; PNA Chartered Accountants had presented a damning report which recommended the total overhaul of the company inclusive of privatising it to protect the local authority.

The report revealed that some of the challenges faced by the company were poor financial receipts and payment mechanisms, poor hygiene and packaging, unavailability of the product, deteriorated taste, quality and consistency, lack of diversity, low shelf life and high prices due to inefficient production processes. As a result of the deteriorating state of the brewery it has been revealed that if the council ever considers selling the company, it would cost $5,6 million.

Five years ago the BMCU-run brewery was dogged by a number of problems with 16 of the council beer halls closed for allegedly incurring losses, while cattle at its Aiselby Farm were disappearing in unclear circumstances. Irked by the closure of the beer halls the council reacted by replacing the entire board.

 

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