Econet Media, the company running Kwese is now insolvent, owing more than $130 million to its creditors and will not be able to continue running its business, TechnoMag has learnt.
Yesterday we broke the news that the company was pulling out the Roku Kwese play devices due to some technical challenges, but it seems the reason was not technical, but rather administrative.
The USA based company, Roku which they have been working with to provide the gadget had this statement to make:
Econet licensed our platform to deliver the Kwesé Play streaming service to its customers. Econet is shutting down the Kwesé Play service and is no longer working with Roku. For more information contact Kwesé/Econet.
As part of the partnership, Roku supplied a customized player for Kwesé Play with a reduced number of channels available. This was to address concerns over the availability of apps that enable piracy, Econet said at the time.
Econet Media has hired Ernst & Young’s Paul Gerald Lincoln, a licensed insolvency practitioner, in an effort to salvage the business.
In a letter by management, they stated a plethora of reasons while advocating for insolvency, part of the letter stated these reasons :
Firstly, the company is in “financial distress” and there is “material doubt” about its ability to pay its liabilities as they fall due.
Secondly, the company had accrued more than $130-million of external liabilities. “Around November 2018, management entered into settlement arrangements with most of the company’s creditors,” the letter said. “All creditors with balances of up to $100 000 were paid in full. In the most part, creditors of the company with balances of more than $100 000 were paid 15% of their balances with agreement that (1) a second installment will be made by the company around May 2019 (25%), (2) a second installment will be made by the company around August 2019 (25%) and (3) a final installment will be made by the company around December 2019 (35%). The company was unable to meet the May 2019 installment.”
Deadline could not be met’
Lastly, management communicated to affected creditors that the second instalment — a total of $35-million — would be paid on 30 June 2019. “Regrettably, with the current macroeconomic conditions in Zimbabwe, which is the company’s primary source of funding, the company has been seriously affected by the currency regime. Accordingly, this deadline could not be met.”
The letter continued: “In the circumstances, the directors believe that it is in the best interests of the company and its creditors that (it) be placed into voluntary administration … and for an administrator to be appointed.”
The group’s inability to expatriate money out of Zimbabwe has had an impact on the business, said the Econet Media CEO Mr Joseph Hundah.
He however said no other business in the Econet Global group is affected by the administration process, he said.
The hope is that the company will be able to continue operating, or “as much as possible” of the business can be salvaged. If not, management believes that going into administration could provide a better return for creditors and shareholders than a decision to wind up the company immediately.
Econet Media owns only 20% of Kwese while, 45% is owned by Royal Bafokeng and 35% by Mosong Capital.