Monday, 4 January 2010

How not to run an economy

The following report comes via,
Nestle SA, the world's biggest food and drink company, says it has temporarily closed its production site in the Zimbabwe capital because employee security is no longer guaranteed.

Nestle's factory in Harare on Saturday received an unannounced visit from Zimbabwean government officials and authorities who forced it to unload a truck of milk, the company said.

Police questioned two local managers and released them without charges the same day, Nestle said in a statement.

"Since under such circumstances normal operations and the safety of employees are no longer guaranteed, Nestle decided to temporarily shut down the factory,'' it said.

Nestle announced in October that it stopped buying milk from eight farms, including one that appears to belong to the family of President Robert Mugabe.

The company had temporarily bought milk from these farms because the government was unable to buy it and the country's dairy industry risked to collapse.

When the government in October resumed purchasing milk from the eight farms, Nestle said it would end the temporary purchases.

But since then Nestle has faced pressure to continue buying milk from these farms, a demand it has refused.
How temporary is temporary? What incentives does this give Nestle, and other companies in Zimbabwe? Obviously the supply of Nestle's products in Zimbabwe must be affected, as will the income of the employees of the firm. Anyone what to take a bet on what will happen to private foreign investment in Zimbabwe? If there is anywhere in the world that needs foreign investment, Zimbabwe would be it. This kind of action isn't the way to attract it. Arbitrary government action of this type only increases regime uncertainty at a time when Zimbabwe can lest afford it. Long-term private investment must be reduced because what remains of investors' confidence in the durability of private property rights is further eroded.

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