Nestle Company Closure Drama Affects Investor Confidence

The recent forced closure of the Nestle Milk Factory in Zimbabwe clearly shows that Zimbabwe’s ruling elite operate a mafia like protection racket aimed at independent businesses and business people. This trend has negatively affects investor confidence and will hinder Economic recovery effort as investors become jittery

There is clear evidence of abuse of political power to gain a business advantage and intimidate investors to make decisions they would otherwise not have made were it not for the presence of a mafia like protection racket being run from the highest office. Reports indicate that the Company has now been offered protection and its staff members safety has been guaranteed.

In a statement late last week (http://allafrica.com/stories/200912250004.html) , Zimbabwe’s Industry and Commerce Minister Professor Welshman Ncube said he had held consultations with Nestlé Zimbabwe, Gushungo Dairies and other "key stakeholders in the dairy sector".Gushungo Diaries is a Business owned and controlled by Zimbabwe’s First family. These negotiations come after Nestle had been forced to close down its operations and endangering several thousand jobs.

The company said, in its statement through AFP, that on Saturday the factory was visited by Zimbabwean "officials" and police, and forced to accept a tanker of non-contracted milk. In a normal country a client can never be forced to take delivery from a non contracted supplier. The contracts are normally there for a purpose including to enforce hygienic standards and avoid ruining the concerned Firm’s reputation by doing business with entities that may have questionable standing.

Reports show that Two Nestle managers were questioned by police but were released without charge after questioning the same day. The “questioning “of managers is clearly an intimidatory tactic employed by corrupt Governments to squeeze favors and bribes from business. This makes Zimbabwe a high risk investment destination. At a time when the country is trying to attract additional Foreign Direct Investment (FDI) this is ill advised for a Company owned by Zimbabwe’s President and his wife to be harassing a foreign investor. What message is this sending to the investing community?

The statement by Minister Ncube continues "As a result of those consultations, the parties have collectively reached an understanding to work together in ensuring that milk produced at Gushungo Dairies is absorbed by the local dairy processors.

"For its part, Government has given its assurance on the safety of staff and management at both Nestlé Zimbabwe and Gushungo Dairies," said the statement.

The latest drama comes a few months after Reserve Bank of Zimbabwe Governor Gideon Gono had temporarily frozen Nestlé’s Bank accounts (http://allafrica.com/stories/200910090831.html). The account freezing incident last for a few weeks to allow “investigations”. An investigation report was never made public as to the findings of this seemingly dubious investigation.

This is a disturbing trend of how Zimbabwe’s leading politicians are poisoning the business environment by grabbing all business opportunities whilst scaring potential investors. Only a few weeks I was highlighting how Vice President Joice Mujuru and her Husband are using their investment front Interfin Merchant Bank to take over my disputed Bank – CFX/Century using brute political force. The take over of CFX /Century Bank by the Mujuru’s through their Bank Interfin despite my protestations show the level of unrestrained self enrichment spree which must be documented and stopped. And if the Nestle /Gushungo Diaries drama is added to the picture it clearly confirms that Zimbabwe’s ruling elite will stop at nothing to control all businesses despite their proven lack of experience in such businesses.

Whilst the protests on Gushungo Diaries and Nestle were based on the fact that the First Family did not pay a fair price for the Gushungo farm and its previous owner was haunted off the farm and forced to accept a token price it matches into the Mujurus’ modus operandi of buying a disputed CFX Bank despite clear evidence that the Bank was looted and unjustly taken from its previous owners. The common denominator being the reliance of political muscle to protect such ill gotten wealth.

If Zimbabwe is to attract fresh and meaningful investment this way of doing business must end. The use and abuse of political office to grab businesses or launder ill gotten wealth must be exposed and discouraged.

This article appears as courtesy of GMRI Capital ( www.gmricapital.com) prepared for 3MG MEDIA – www.3mgmedia.ca

Gilbert Muponda is a Co-Founder of 3MG Media . He can be reached at;

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