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Employees block sale of textile company

[Malawi] Malawi's colourful chitenge's IRIN
Malawi's colourful chitenges
Employees of Malawi's troubled textile manufacturing company, David Whitehead and Sons (DWS), secured a court injunction blocking completion of a sale under the country's privatisation programme, citing an unacceptably low price for a business now generating profits. Cotton farmers and over 2,000 employees, retrenched when DWS finally closed last year, said they would rally behind the new management and announced a planned peaceful demonstration this week to deliver a petition to President Bakili Muluzi in support of calls for a higher price of not less than Mk300 million (US $3 million), or that the whole deal be cancelled. The Privatisation Commission (PC) announced last week that DWS, famous for its bolts of bright African cotton prints, was sold to two bidders, Mapeto Wholesalers and its partner from India, Jimtex, who have formed a new company, Mapeto (DWSMalawi) Ltd, after several previous attempts yielded no results. Evelyn Mwapasa, chief xxecutive for DWS, and 10 members of her management team cited a "suspiciously low" price of Mk73 million (US $768,421) and obtained a court injunction threatening PC and Mapeto Wholesalers with possible imprisonment for contempt of court if they go ahead with the sale. Many telephone callers on Monday told a local radio station they supported calls for reversal of the decision to sell DWS, as it had demonstrated its capacity to bounce back and could provide employment to over 2,000 families in Blantyre, the country's commercial capital. The new company was expected to invest over US $10 million in the rehabilitation of the plant and create employment for over 3,500 people over the next five years, the commission had said. Mwapasa said the company was now able to generate profits, had been paying off creditors and had a positive bank balance of Mk14 million (US $147,368). "Since October 2002, the company has been able to pay off old creditors and other expenses not relating to the current operation to the tune of K16 million ($168,421). A point to be stressed is that the cash flow achievements outlined have been realised in spite of the fact that the company was never provided with working capital [since October 2002]," she said. DWS was once a leader in cotton textile production but exports started to suffer in the 1990s as a result of machine breakdowns, a fire that destroyed important equipment, and increasing competition from Asian and central and eastern European factories. It was also adversely affected by lower cotton production due to falling world prices and imported second-hand clothing that has flooded Malawi. Earlier reports said the government was spending K20 million (US $223,000) a month to keep it going and had to pay up to K150 million (US $1.6 million) in compensation to retrenched employees. Malawi's textile industry benefits from quota agreements with the South African Customs Union, the European Union/ACP preferential trade agreement and the US's African Growth and Opportunity Act Under Muluzi's government, Malawi embarked on a programme of economic reforms in 1995, including the sale of state-owned enterprises, but critics say many of these companies have since closed down, causing thousands of people to become unemployed. The programme was briefly suspended in 2001 for a government review amid accusations of irregularities and complaints that local bidders were not benefiting.

This article was produced by IRIN News while it was part of the United Nations Office for the Coordination of Humanitarian Affairs. Please send queries on copyright or liability to the UN. For more information: https://shop.un.org/rights-permissions

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