BRITISH American Tobacco (BAT) is divesting from Zimbabwe, NewsDay Business has established.
Well–placed sources said the company was working out an exit plan from the troubled southern African country for yet an unspecified reason, but many suspect the decision could be influenced by the recent change of regime on the political front that saw long-time ruler President Robert Mugabe winning by a landslide.
This comes as it emerged a few months ago that BAT had scaled down on its Zimbabwean operations and is now outsourcing various local brands from its global network, raising fears of retrenchments.
Conglomerates tend divest for political reasons.
A notable example was the withdrawal of American firms from South Africa at the height of apartheid.
Employees fear the company could leave them in the cold as production at its factories is currently very low.
BAT is said to be manufacturing the Madison 30 pack in South Africa for sale in Zimbabwe, and has stopped Cutrag operations for Mozambique, an indication the firm could soon be exiting the Zimbabwe market.
Sources said initially, only BAT’s Dunhill Brand was coming from South Africa.
But the company last year said it was merely leveraging the machine capacity installed in one of the company’s hub factories to offer consumers the innovation of a Madison 30s pack format.
The company claims its manufacturing facility in Zimbabwe continues to produce at full capacity in the 20s and 10s formats.
The group late last year dismissed several of its Bulawayo-based staff members.
A July 2013 National Social Security Authority (NSSA) Harare Regional Employer Closures and Registrations Report for the period July 2011 to July 2013 shows 711 companies in Harare closed down, rendering 8 336 individuals jobless.
In addition, many companies are downsizing and have retrenched tens of thousands of their employees, condemning them to a gloomy future. More and more companies are being liquidated, while others are being placed under the care of judicial managers as economic problems besetting the country mount.
Major companies that have retrenched include platinum miners Zimplats and Unki, Spar Supermarkets, Dairibord, Cairns, Olivine Industries and PG Industries.
According to the NSSA report, 330 companies in Harare, in the retail and other business services category, closed while administration-related businesses also suffered a huge knock with 59 companies closing, with the construction and baking industries losing 42 and 32 companies respectively.
BAT Zimbabwe was last year accused of industrial espionage after it emerged its competitors — Kingdom, Savanna Tobacco, Breco (Fodya), Cutrag, Trednet and Chelsea — had lost cigarettes valued at R100 million to armed hijackers in just over a year. The cigarettes were mostly destined for South Africa.
BAT, the largest cigarette manufacturer in the country, firmly denied the allegations from competitors.
But BAT Zimbabwe spokesperson Shingai Rhuhwaya said the operation was an integral part to the group, adding that company remained a strong business and counter on the Zimbabwe Stock Exchange.
“Only just last year BAT Zimbabwe through our Employee Share Ownership Trust have given employees the opportunity to become part owners in the business towards building the long-term sustainability of the business,” Rhuhwaya said.
“For example, given our global platform, BAT Zimbabwe can, and has, taken a strategic decision to leverage the machine capacity installed in one of the company’s hub factories to offer our consumers the innovation of a Madison 30s pack format. Our manufacturing facility in Zimbabwe continues to operate at full capacity to produce all our quality local brands in the 20s and 10s formats.”
This would not be the first time BAT has taken a business decision to divest from a country for various reasons. Last year, the group stopped its tobacco-processing plant in Uganda, rendering at least 26 employees jobless and hundreds others uncertain of their future.
The company is switching its manufacturing operations to Kenya as it decommissions the factory.
The group is reported to have opted not to invest in a $75 million plant because such an investment did not make economic sense given that it had an installed capacity to process 50 million kilogrammes of tobacco each year against an average 15 million kilogrammes BAT buys annually.
BAT closed its plant in Ghana and moved the machines and equipment in the factory to Nigeria, where the company manufactures for its West African market.
The conglomerate also sold its Zambian head office, factory and other assets and remodelled its business from manufacturing to simply marketing cigarettes.
Sources say while BAT views the Zimbabwe operation as too small, it has given them huge headaches over the years and might just be the excuse the multinational could have been waiting for.