Doing business with the devil

A row over Nestlé‘s business dealings with Grace Mugabe is likely to spook many other foreign companies in Zimbabwe, where business dealings with members of Robert Mugabe’s circle are a daily reality.

Reacting to reports that Mugabe’s wife Grace owns the multimillion-dollar Gushungo Dairy Estate seized during Zimbabwe’s land grabs, which now supplies Swiss company Nestlé, Georgette Gagnon, Africa director of Human Rights Watch, called for an international investigation into ‘corporate behaviour and irresponsibility”.

Anti-corruption group Global Witness said that ‘it’s something the European Commission and the Swiss would want to look into”.

According to Nestlé, half of its contracted dairy suppliers had gone bust under Mugabe’s land seizures, forcing the company to source milk on the open market, including Gushungo. The latter accounts for between 10% and 15% of Nestlé‘s local milk supply.

‘Had Nestlé decided to close down its operations in Zimbabwe, the company would have triggered further food shortages and hundreds of job losses among its employees and milk suppliers in an already very difficult situation,” the company said.

It was the familiar refrain of foreign companies pressured to leave Zimbabwe: pulling out would leave hundreds jobless. But the truth is that with Mugabe backers now major players in agriculture and industry, few businesses have an alternative.

British American Tobacco’s Zimbabwe associate, BAT Zimbabwe, remains one of the largest buyers of tobacco, which is grown by the few remaining white farmers, poor black peasant farmers and some senior Mugabe henchmen.

BAT Zimbabwe this year bought 15-million kilograms of tobacco from the farmers. The company will consume just 10% of this, exporting the bulk to other BAT operations worldwide, according to BAT managing director Lovemore Manatsa.

Last year, German company Giesecke & Devrient was pressured into cancelling a contract to supply the paper on which the Reserve Bank printed worthless Zimbabwe dollar banknotes.

Foreign banks, such as Barclays, continue to channel cheap state loans to farmers sitting on seized land. Such services are mandatory and banks risk their licences by not complying.

Two South African retail giants looking to expand in Zimbabwe will inevitably have to source produce from seized farms and will have some business dealings with a Zanu-PF-linked company Pick n Pay owns 25% of Zimbabwe’s biggest supermarket chain, TM, whose parent company Kingdom Meikles Africa Limited is going through a politically charged de-merger.

Shoprite, which has a single store in Bulawayo, is said to be negotiating for a majority share of OK Zimbabwe, valued at $52-million.

Mount Carmel farm, the country’s biggest mango producer, was taken over and farmer Mike Campbell’s farmhouse razed to the ground. His $600 000 mango crop was seized and a pressure group drawn from white farmers had to mount a campaign to try and stop stores from buying the produce.

In 2002, Sainsbury’s of London purchased close to $750 000 worth of produce from a farm seized by army general Constantine Chiwenga. At the time, Sainsbury’s claimed it was unaware the farm had been taken over, as the purchase was channelled via British-owned agent Hortico.

According to central bank export reports, Sainsbury’s and UK retailer Waitrose still source fish from Zimbabwe. British supermarket chain Tesco only stopped buying farm produce from Zimbabwe last year, eight years into Mugabe’s land grab.

The company had previously bought $2-million worth of citrus from Zimbabwe annually, according to central bank figures. While most companies have chosen to ride out the storm, others have withdrawn under pressure.

In 2007, United States food giant Heinz sold its 51% shareholding in Olivine, Zimbabwe’s largest cooking oil producer.

The government accused the company of acting on Washington’s orders not to buy sunflower seeds and soya from farms seized from white farmers. But with investor interest growing, assets put up for sale by fleeing foreign interests are quickly snapped up.

As soon as BP and Shell announced a pullout from Zimbabwe last month, Engen and Kenya’s KenolKobil put in a bid for their 75 service stations and 30-millionlitre blending plant. While seizure of their assets by Mugabe is their greatest anxiety, many foreign businesses also fear losing market share when many believe the battered economy has bottomed out.

Shoprite and Pick n Pay, for instance, will find the retail market is increasingly being taken over by Chinese-owned supermarket chains whose owners are gobbling up prime locations abandoned by larger operators and have fewer misgivings about dealing with Zanu-PF.

Many foreign firms have come to believe that having influential political figures among the shareholders is good for business.

This week, African Consolidated Resources, the British company whose diamond claims in eastern Zimbabwe were seized by the government and allowed to descend into anarchy, won a landmark court ruling that allows it to take back the rich diamond fields.

The company, listed on the London Stock Exchange’s Alternative Investments Market, is said to be partly owned by Solomon Mujuru, a senior Zanu-PF member.

Mujuru is also a partner in another diamond mine, River Ranch, together with Saudi billionaire Adel Aujan. Zanu-PF itself, via a string of shelf companies, is also a major investor on Zimbabwe’s booming stock exchange.

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