Business, Politics

Nestlé chooses dollars over Zim dollars

By Branko Brkic 24 December 2009

Morgan Tsvangirai (and, presumably, Robert Mugabe and his wife) thinks Nestlé is silly for shutting down an entire plant because of undue government interference. Maybe they aren't quite as familiar with risk/reward calculations as one of the biggest consumer food companies in the world is.

When the cops showed up at a Nestlé plant in Zimbabwe and started throwing their weight around, they were probably just trying to intimidate managers into taking milk from the ill-gotten farms of Grace Mugabe. They sure weren’t expecting the company to take the nuclear option – but that’s what they got. Nestlé promptly shut down the entire operation, saying it wasn’t prepared to risk the safety of staff in such an environment.

Which is a laudable standpoint, and almost certainly true, but that’s only part of the story. The timing of the decision, plus the delay in originally deciding that Mugabe’s wife’s milk is off, indicates a head office decision. And while staff safety may have been the first thing on the mind of the international managers, the safety of their brand would have been a damn close second.

Zimbabwe isn’t exactly a massive profit centre for Nestlé, but SA is. So is Britain, the EU, the US, Canada, Australia, the rest of the English-speaking world, and the rest of the non English-speaking world. A decline of a fraction of a fraction of a percentage point in just a few of those markets (say after a political action group calls for a boycott, or a local newspaper publishes an investigative story) would outweigh the value of the entire Zim operation by orders of magnitude.

Dealing with state-run Chinese companies has clearly softened the heads of Zimbabwean apparatchiks. They are used to getting their own way in those discussions, and even global mining houses tend to give ground when rich deposits are at stake. Somebody should point out to them that consumer companies march to a different beat.

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