Is Nestle's new Mozambique factory related to its political troubles in Zimbabwe?

Jun 26, 2011

Zimbabwe used to be the proud regional hub for many international companies, and was well-placed to play that role. Much of that has changed in recent years, with several of Zimbabwe's neighbours benefiting from its loss. It seems likely that Nestle's plans to open a new factory in Mozambique is not unrelated to the problems the multinational faced with the authorities in Harare in 2009.

At that time Nestle shut its Harare dairy plant for a while, citing political harassment over its refusal to accept milk deliveries from a farm it did not have a contract with. Apparently the company had from time to time accepted deliveries from the supplier on an ad hoc basis, but all hell broke loose when the company turned down one such delivery. The only problem was that the farm in question was that of a certain Mrs.Grace Mugabe, wife of the president.

Nestle said that government officials and police forced its staff to accept the milk delivery on that occasion.

The messy squabble was eventually resolved somehow, but not before many ugly things had been said about Nestle by Mugabe supporters. What might have in different circumstances been a fairly small and easy to settle business matter became a huge political headache for Nestle.It was claimed by some that Nestle turned away Mrs. Mugabe's milk as part of the US/EU sanctions against her and others close to her husband, a charge the Swiss company denied.

But in some international quarters others wanted to do what Nestle was doing continuing to conduct business in Zimbabwe anyway, and with the Mugabe family in particular. The farm in question was expropriated its previous white owner and ended up in Mrs. Mugabe's hands. Controversial actions such as this are of the reasons that many investors in the West and elsewhere consider Zimbabwe as a country to avoid.

Clearly Nestle was in a no-win situation. It was entirely predictable that the company would quietly review its operations in Zimbabwe over the incident.

In July 2010, several months after the Mugabe milk incident, Nestle announced it was expanding its operations in Africa, and would build new factories  in Angola, the DRC and in Zimbabwe's neighbour Mozambique.

Paul Bulcke, Nestlé CEO, said: “Nestlé is committed to unlock the business opportunities and to promote growth in Equatorial Africa. With 400 million people and an emerging middle-class with rising purchasing power, this region has major potential for Nestlé. By opening new factories in the region, we are closer to our consumers and can better adapt our products to their taste and nutritional needs. At the same time, we share our success by sourcing locally, creating new local employment and helping in the further development of the region.”

 Fair enough, a well explained business move in a region that is beginning to stir out of its economic slumber.

But Mozambique is not really part of 'Equatorial Africa.' Geographically and in every other way it is part of southern Africa, and its market could have easily been served from Nestle's already well-established Harare plant. This would likely have been the calculation in Zimbabwe's good days. Even if Nestle's Mozambique/regional expansion strategy had been mooted several years before, the menacing run-in with the political establishment in Zimbabwe would almost certainly have made the company change its mind about any thoughts of basing its Mozambique operations from its Harare plant.

Nestle would almost surely deny that it is shifting operations towards Mozambique and away from Zimbabwe. Yet its stated plan for the new factory/distribution center in Mozambique is that it "will support the increasing demand in Mozambique and neighbouring countries for Nestlé products." One wonders if that is not the role its Harare operation was doing  all these years, and that it would have been expanded to continue doing under different economic and political circumstances. It would not at all be surprising to soon hear that the Zimbabwe market is being supplied Nestle products from the new outfit in Mozambique.

So while Zimbabwe's politicians plead with new investors to come to help lift the economy out of its long slump, the long-term existing investors are treated in ways that make them quietly, politely slip away to other countries.

Sadly, for the umpteenth time the score of the match is Zimbabwe zero, another country one.


Post a Comment