(Last Updated on November 12, 2015 by Editor)
ZIMBABWE – American multi-national food, snack and beverage corporation, PepsiCo, is to open a multi-million dollar plant in Zimbabwe following the intervention of President Robert Mugabe during his recent trip to India, the Financial Gazette’s Companies Markets has established.
PepsiCo had sought to start operations in the country three years ago, but had been frustrated by bureaucratic bungling and demands for bribes by senior government officials, including Cabinet ministers, sources indicated this week.
The situation highlights how several crucial deals, capable of turning around the frail economy, have collapsed due to frustration encountered by investors refusing to pay bribes for approvals, and often failing to get access to President Mugabe for help.
Sources indicated this week that an Indian billionaire had seized on an opportunity to meet President Mugabe in India last week to highlight the plight of the company, well known in Zimbabwe for its beverages but also with interests in the manufacturing, marketing and distribution of grain-based snack foods and other products.
President Mugabe was in India for the Africa-India summit, which he jointly chaired with Indian Prime Minister Narendra Modi.
The high level Africa-India summit was held in New Delhi, the Indian capital, last week.
Ravi Jaiparu, one of India’s wealthiest individuals with a net worth estimated by Forbes magazine at US$1,67 billion, is said to have requested a meeting with the President on the sidelines of the summit.
He is said to have told the head of State that after getting the approval of the Zimbabwe Investment Authority to set up a PepsiCo plant in Harare almost three years ago, hurdles had been thrown in the way and delayed implementation of the project.
It is understood that Jaiparu avoided giving details of any bribery request, but President Mugabe has personally acknowledged before that his Cabinet ministers were in the habit of asking for bribes to facilitate foreign projects.
Now, a week after the discussions, Varun Beverages will be holding a ground breaking ceremony to start a US$30 million PepsiCo plant in Harare tomorrow.
A number of Cabinet ministers will witness the event.
PepsiCo is the world’s second largest food and beverages business by net revenue, and its entry into Zimbabwe is expected to create 500 jobs and 3 000 more in downstream industries.
Sources with knowledge of the PepsiCo deal said the Indian billionaire took reservation in being told to move from one agency to another, while conflicting policies had made it difficult, over three years, to finalise the paperwork.
“The Ministry of Finance and Economic Development demanded certain things; the Ministry of Industry and Commerce said something else. Compliance with the Indigenisation and Economic Empowerment Act was also a talking point. It is bureaucracy that is affecting the flow of investment in this country,” a source said this week, preferring to remain anonymous.
“When the president of PepsiCo India (engaged President Mugabe), it was all systems go because they had started doing their ground work and they had already bought land,” the official said.
State media reported last week that the Indian billionaire met President Mugabe at the summit.
“I would like to complete my first venture in Zimbabwe before the end of the year 2016,” Jaiparu was quoted as saying.
“It is an honour and pleasure to meet His Excellency President Mugabe and his Cabinet ministers. I would like to take this deep friendship and trust bestowed on me a step forward and become business partners,” State media reported.
But the startling revelations of bungling should force President Mugabe’s government into self-introspection.
PepsiCo is the world’s second largest food and beverages business by net revenue
Elsewhere in this newspaper, we report desperate efforts by government to ensure an economic revival through an average of four weekly meetings between Cabinet ministers and President Mugabe or his Vice Presidents.
The meetings involve discussions on the expeditious approval and implementation of projects to ensure new companies are formed, old ones survive and jobs are created. In recent years, the economy has shown signs of significant distress, characterised by company closures and job losses.
The unemployment rate is fast creeping towards 90 percent as more companies continue to collapse under pressure from a worsening economic crisis.
This has been compounded by prolonged deflation, a liquidity stress and a plunge in exports and foreign direct investment (FDI).
At about US$545 million per annum, Zimbabwe is receiving only a trickle of FDI compared to regional economies like Mozambique, which clocked about US$5 billion last year.
Lack of investment has been blamed for the economic downturn of the past 15 years.
Although plans have been underway to improve the investment climate, authorities have frequently come up with more hostile policies and laws.
In the World Bank doing business report published last week, Zimbabwe was ranked number 155 out of about 189 countries surveyed, making it one of the world’s most hostile places to start a business.
This is also demonstrated by the stressful experience the Indian investors have gone through.
The national competitiveness report launched last week listed high cost drivers, lack of infrastructure, power blackouts, erratic water supplies, corruption and red tape among the greatest threats to doing business in Zimbabwe.
It also said there were significant constraints to starting companies, hiring people, getting permits, conducting business operations in Zimbabwe, where efforts to pool all government agencies that interface with investors under one roof has proved difficult.
At the Africa-India summit, Modi announced that India would provide a US$10 billion concessional credit to Africa in the next five years, along with a US$600 million grant assistance.
Modi said that the credit line would be in addition to the ongoing credit programmes in Africa, adding that the grant assistance included “an India-Africa Development Fund of US$100 million and an India-Africa Health Fund of US$10 million.”