Nestle could be next target for Zim government
By: Tawanda Karombo
8 Jan 2013 15:04
International refined foods manufacturer Nestle invested $12m into its
Zimbabwean operations in 2012 despite the uncertainty surrounding its future
in Zimbabwe as the government has not yet decided upon its indigenisation
compliance plans. However‚ the Swiss company has reiterated its commitment
to its operations in the country.
In Zimbabwe‚ Nestle manufactures foodstuffs for babies and also makes
cereals and powdered milk under various brands. The company‚ according to
informed sources‚ is treading carefully in Zimbabwe following a previous run
in with the government after announcing that it had stopped procuring milk
from President Robert Mugabe’s dairy farm.
However‚ Nestle Zimbabwe says it is committed to continuing with its
operations in the country‚ adding that the operating environment in the
country‚ although fraught with challenges and uncertainties‚ is “stable”.
“Nestle Zimbabwe has been in Zimbabwe for 53 years both in times of economic
downturns and in times of prosperity and surely the company will manage the
situation as it comes in order to secure its survival for a long time to
come‚” said Nestle Zimbabwe executive director Farai Munetsi‚ in response to
Business Day questions.
Independent economic analyst Moses Moyo said the company would be on the
government’s checklist for indigenisation compliance. Economists and
investment analysts are worried that President Robert Mugabe and his Zanu PF
party could be using the empowerment policy to drum up support ahead of
elections expected this year.
“Despite doing well and enjoying a good market share‚ the indigenisation
policy is still a scare for the company and this has to be settled to enable
it to be certain of its future in the country‚ especially with threats that
have previously been made against the company‚” said Moyo.
Munetsi said Nestle Zimbabwe’s “indigenisation proposals” were still under
consideration by the government and added that the two parties “are still in
discussion” over the issue.
Zimbabwe is a key market for the company in the Southern African region‚
which is said to have the fastest growing population. This will provide
further growth demand for the company’s products.
In September this year‚ Nestle Zimbabwe set up a new cereals manufacturing
line and upgraded another.
The manufacturing plant in Harare is operating at 54% of capacity‚ above the
average capacity for most manufacturing companies in Zimbabwe although there
is room to ramp this up. Munetsi said it was difficult to measure the
company’s market share as “products are not consistently in the market”
while there is also strong competition from “imports”.
The subdued capacity utilisation for the foods manufacturing industry has
led to high imports which are however covering up for the “industry wide
low-capacity utilisation”.
Analysts said companies such as Nestle Zimbabwe are likely to continue
encountering problems that persisted in the country in 2012. These range
from a tight liquidity crunch that has driven up the cost of borrowing‚ and
erratic and unreliable power and water supplies.