BELEAGUERED hospitality concern, Rainbow Tourism Group (RTG), is scrambling to avert demise after its current liabilities more than doubled during the half-year to June 30, 2015, against the backdrop of shrinkage in current assets.

Current liabilities swelled to nearly US$29 million during the reporting period, from US$13 million during the comparable period the previous year.
This was against a low current assets portfolio of US$9 499 109 during the half year reporting period, from US$12 483 031 during the prior comparable period, translating into a huge negative working capital of US$19 484 322 during the half year to June 30, 2015.
The situation inevitably portends disaster for the group, whose other debt amounting to US$10 million is due at the end of the current financial year to the National Social Security Authority (NSSA), which is under scrutiny after the auditor-general criticised its perpetual support to t
he hotel and leisure group even against the backdrop of RTG’s failure to service debts.

The RTG board said it was in negotiations with NSSA “to structure the facility before end of year 2015”.

Inevitably, this will place NSSA in an invidious position, considering that it has come under pressure for poor investment decisions in at least two other struggling listed firms in which it has lost millions of dollars.

The compulsory pension fund, often criticised for alleged recklessness in the management of millions of dollars in public funds, was this year warned by the auditor-general that it risked losing money lent to RTG in the likely event that the company failed to repay its debts.

Now, it would appear the auditor-general’s counsel was prophetic. RTG also has borrowings amounting to US$4 million which are also due this financial year, and has a bank overdraft funded to the tune of US$1,4 million.

Board chairman, John Chikura, said revenue performance had been negatively affected by low conferencing activity in the first four months of the year.
A decrease in foreign business, which he said was mainly driven by South African visitors, had been witnessed during the reporting period. This was mainly due to the weakening of the South African rand, which made Zimbabwe a very expensive destination for South African visitors.
Zimbabwe is using a hard currency regime after ditching its defenceless currency in 2009. Although the hard currency regime is composed of multiple foreign currencies, it is dominated by the greenback, with which companies and national budgets are structured.
“The group’s revenue per available room (RevPAR) decreased by six percent to US$30, from US$32 recorded during the same period last year. The drop in the group’s RevPAR was due to rate softening and lower occupancies during the period compared to the corresponding period last year,” said Chikura.

He said the group would continue to pursue a pricing model aimed at promoting domestic tourism in order to boost activity at all its hotels.
“The group launched a series of promotions including new weekender rates, RTG online auctions, and the Rainbow delight menu. These programmes are meant to minimise the impact of liquidity challenges in the domestic market,” said Chikura. financial gazette

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