Zimbabwe's crumbling industry sector has allowed investors to scoop up struggling companies.
The collapse of industry in Zimbabwe has provided a boon for South African companies, which have been making inroads into the country by snapping up ailing companies.
South Africa remains one of Zimbabwe’s biggest trade partners alongside China and the United Kingdom. According to Zimbabwe Statistics, the country imported $3.4-billion in products from South Africa and exported goods, especially minerals, worth $2.43-billion. The dominance of South Africa in Zimbabwe’s economy and the rest of the Southern African region came under the spotlight during last month’s Southern African Development Community summit, where President Robert Mugabe openly expressed unhappiness with South African President Jacob Zuma’s refusal to sign the SADC protocol on trade in services. Mugabe chastised Zuma, saying South Africa must co-operate and not turn the continent into an open market for its products.
The Confederation of Zimbabwe Industries has already warned of the gloomy state of industry in the country and says its annual manufacturing survey report, to be released later this year, will show that factory capacity utilisation has slipped to 30% from 39% last year.
Economic commentator, John Robertson said that the entry of South African investors has been slowed down by Zimbabwe’s 51% indigenisation law, which has put many investments on hold.
“The level of involvement by South Africans is welcome, but we need more. South African investors must bring in more capital for infrastructural development projects and not only the retailers such as
Pick n Pay, which bring already finished goods into the country, because at this point we are carrying large stocks of South African goods,” said Robertson.
‘If they comply, that is fine’
Francis Nhema, the minister of youth development, indigenisation and economic empowerment said there was no concern from government’s point of view if there was an influx of South African companies operating in the country and they would not be stopped from taking over ailing firms.
“When they come in here, they comply with the laws of the land. If they comply with the laws of Zimbabwe that is fine and they are not doing anything wrong. If they buy the companies, they do so also complying with the regulations of the country,” Nhema told the Mail & Guardian this week.
In one of the biggest deals for the country recently, JSE-listed packaging concern Nampak said it would invest $10-million in the next year to expand its Zimbabwean business after consolidating its shares in Zimbabwe operations – Hunyani Holdings, MegaPak and Carnaud Metalbox – under a new company, Nampak Zimbabwe Ltd, in which it will own a 51.43% shareholding, and which listed on Monday on the Zimbabwe Stock Exchange, replacing Hunyani.
In July, Kentucky Fried Chicken reopened its Harare branch after seven years.
Last year popular South African franchise Mugg & Bean made an entry into Zimbabwe. Other local companies that have South African firms lying in wait to snap them up include Mutare-based Kenrose Filters, which in July received a $6-million offer from South African automotive parts manufacturer GUD Filters to buy it.
Robertson said the government was in conflict over how to proceed with the 51% indigenisation law. Some officials are determined to keep the law in its harsh form whereas others are willing to make concessions for investors.
“The people in government who are supportive of indigenisation are hoping to get something from nothing. But they do not realise that most companies will not invest additional money if the current structure of the law is kept as is,” said Robertson.