David Whitehead Textiles Ltd. filed for provisional liquidation with the High Court Thursday.
The company manufactures textiles, printed and dyed fabrics. It says it can no longer afford to pay wages after the National Employment Council for the textile industry raised salaries 66 percent.
An increase in electricity costs also has compounded the company’s financial difficulties.
The company is also facing competition from cheaper imported fabrics.
Its collapse is expected to negatively affect related industries in the retail, furniture and medical sectors.
This comes on the background of an announcement by the Finance Minister Tendai Biti that Zimbabwe will grow by 6 to 7 percent in 2009 and capacity utilization, revenue collection and foreign investment will rise, but it still facing total debt of $5.7 billion.
Southern Africa’s former breadbasket has seen its once-vibrant economy shattered by poor policy choices by President Robert Mugabe’s government, particularly the seizure of white-owned farms for the resettlement of landless blacks.
But the formation of a unity government by Mugabe and his political rival Morgan Tsvangirai appears to have halted the economy’s free-fall, although unemployment still hovers around 80 to 85 percent.
Zimbabwe was currently compiling a list of state companies for sale as it bids to raise funds, including communications companies and banks.