BAT divests Zimbabwe operations

BRITISH American Tobacco (BAT) is divesting from Zimbabwe, NewsDay Business has established.

Chris Muronzi

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.

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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.

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30 Comments

  1. It just business but politics played a part. In most of the countries they moved they wasn’t serious tobacco farming.

  2. It’s sad, we in the industry knew this was coming. These empowerment laws are doing a lot of damage. For BAT, Zimbabwe is an insignificant market, they can service it from SA. What they will do is buy processed tobacco from here and pack it in SA, then export it back to us. We have lost. And the Chinese are not keen on making cigarettes here either, they just want the threshed leaf. Now, the whole concept of beneficiation is lost because of policy conflict in our gvt. If we want beneficiation, lets be a bit reasonable on empowerment. Lets choose what we want before another BAT leaves. Next is Delta.

  3. As zimbabweans lets learn to see opportunity… bat does not leave with the smokers… why cant we then establish local firms that will satisfybthe void left?

    1. ndinobhema madison chete.

      1. I pfutseki kwana ndobhema Madison chete company yekuita sei.

  4. What and reinvent the wheel… By the way there are local companies – but again they are under 51% obligations so will soon be run into the ground. We will become like Somalia in a few years and still nothing will be done…. I heard once that ‘a people get the government they deserve’… very true… Looks like it’s all back to the badza

  5. ngavapfige,there is nothing political apa,jus failing to keep up with stiff savannah competition coz o their steep pricing model.
    they thot customers would stick with them coz o brand loyalty around 07/08 wen pacific brands made inroads using low prices to lure smokers

    1. vanhu vanobhema savanna vanogarondikumbira medha nokuti savanna inosiya kaafta taste mukanwa. kushaya mari chete otherwise vanotoda madison.

  6. chinobhururukachinomhara

    If zpf is serious about indiginisation all these closures should signify a golden opportunity for them to shine. They should ’empower’ people by allowing them to take over these now defunct operations. If they succeed then we will recognise the fact that the program was indeed genuine. They should stop harrasing firms that are still holding on inspite of the horrible economic conditions they have created.

    1. I think you are missing the point of these closures. They will take their equipment as well as their so called “brands” when they go. Pano sara mabuilding chete. Food for thought!!!!!!Vaka jaira ku bikirwa sadza vasinga tenge muriwo wacho…

  7. Tinenge tarasikirwa

  8. You do this to youeselves! The world laughs at you and you constant greed!

  9. the president attacked BAT for unfair practices they feel threatened better get out while they can

  10. This is a golden opportunity for the government if we are serious with indeginasation. Taking over such an operation and successfully running thus will send a message that we are serious business people

  11. Why taking advantage of other peoples hard work. Who would want to give 51% of his company coz you are black. Everyone is gonna end up un employed or working kwa chisora

  12. To me it looks like we will end up importing everything – from cobra, match sticks, margarine, Madison and even Brazilian chickens. Don’t we have to be a net importer? Seka nhamo serugare!!! Sekuru vakati vavava zvavo musofa!!!

  13. Good comment and observation. The principle of hating western companies by government leaders will end up with far more imports and less jobs.

  14. You can rigg elections but u can’t rigg economy. As long Mugabe & his Zanu PF is still in power expect d worst.

  15. Saka kana iri kubuda BAT wch means kuti tapinda tapinda isu takapinda mu contrAct ne BAT ticha bhadharwa mari hobho pafodya gore rino yeeh yeeh

  16. Indigenize chimonera for no health tips are offered on the twist or is packet!!

  17. Workers should not cry. They should actually position themselves to take the machines as part of retrenchment package and carry on manufacturing Maddison. They should keep their eyes open for dubious movement of capital/machinery items.

    1. I think you are lost in your own world… wake up!!!!

  18. Another White Elephant along Rothmans . -C A P S

  19. Gonawapotera. Unoti machinery inongoshanda yoga? ko working capital, ko management, ko macontracts, ko brand protection, Intellectual propoerty wakamboinzwa? there are many things besides just machinery choita kuti compny ibudirire. Ko magetsi?

  20. I think that is the honest thing that BAT wants to do
    Let locals take over including critical workforce there then they carry-on with tobacco beneficiation
    I think its not difficult

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