Tycoon acts to save PepsiCo deal

Source: Tycoon acts to save PepsiCo deal | The Financial Gazette May 19, 2016

AN Indian billionaire planning to set up a multi-million dollar PepsiCo plant in the country visited Zimbabwe over a fortnight ago to clear bureaucratic hurdles, which appeared to stall the project, the Financial Gazette’s Companies & Markets (C&M) can report.
Ravi Jaipuria flew into the country for talks with government officials and other stakeholders after delays in the granting of certain approvals stalled progress on the US$30 million PepsiCo plant.
PepsiCo is an American multi-national food and beverages giant.
Previously set for completion before year-end, the plant might now not be finished in December due to delays by the City of Harare, which has to give the project a green light, according to people familiar with the transaction. It was the second time that the Indian tycoon arrived in the country specifically to deal with problems in facilitating the development of the project. Despite the country desperately needing foreign direct investment, its policies and administration of investment-related institutions and State organs have combined to deter foreign investment.
The Indian tycoon had last year visited the country before meeting President Robert Mugabe during the Africa India summit in November, where he laid out a vision that was far beyond beverages production.
C&M understands that his plan includes setting up a tomato processing plant and hospital, among other investments.
This week, Jaiparu’s Zimbabwean partner, Adam Molai, confirmed that the project had been stifled by red tape and bureaucratic bungling, which authorities were now trying to resolve.
“The regional CEO is now here to run with the project and to make sure that we implement it as quickly as possible,” Molai told C&M.
The regional CEO is Krishnar Shankar, who leads the southern African operation. Shankar helped set up southern African plants in Zambia and Mozambique and was present at a ground breaking ceremony in November attended by government officials, including Industry and Commerce Minister, Mike Bimha, and Finance Minister, Patrick Chinamasa, who all promised a friendly business environment to foreign investors.
“The funding is there, and we have been going through regulatory approvals. The contract has been signed and my partner was here last week.
“He asked government to expedite the approvals to make sure we complete the project by the end of the year if possible.
“The delay was caused by the fact that the land belonged to NMB, and the City of Harare has been delaying the subdivision. They are working on this now,” said Molai.
NMB Bank is a local commercial bank owned by NMBZ Holdings, which is listed on the Zimbabwe Stock Exchange.
During his recent visit, Jaiparu, the proprietor of the Varun Beverages in India, which has undertaken to set up the plant under franchise, is said to have met authorities in the Ministry of Industry and Commerce to impress upon them the urgency of granting of certain approvals, among them a certificate of compliance from the City of Harare, which has to subdivide the land.
Jaiparu is one of India’s wealthiest individuals with a net worth estimated by Forbes magazine at US$1,67 billion.
On completion, the PepsiCo plant is projected to create at least 3 000 jobs.
It will become the single largest competitor to beverages conglomerate, Delta Corporation Limited, whose fortunes have recently been affected by a liquidity crunch that has combined with increasing joblessness to erode disposable incomes and consequently sales.
C&M reported in November last year that PepsiCo had sought to start operations in the country earlier but had been frustrated by bureaucratic bungling.
Molai said while great strides had been made towards business reforms at national level, the local government system was still fraught with red tape, which undermines the implementation of deals that could bolster ongoing efforts to repair the country’s ailing economy.
“We do not want to end up building illegal structures,” said Molai, referring to delays in granting a certificate of compliance on the land on which the plant would be built.
“The ease of doing business in this country has improved at national level but at local authority level, we still have problems,” he said.
Last week, Molai flew to Lusaka, Zambia, to familiarise himself with the PepsiCo operations in that country, as he moved to promote one of the major investments recently announced in Zimbabwe.
After the ground-breaking ceremony in November, PepsiCo shipped significant tonnes of bricks and deployed contractors on site, which have completed a wall.
But in recent months, there has been no activity on site, and the wall is now overshadowed by tall grass.
PepsiCo is the world’s second largest food and beverages business by net revenue.
Last year C&M reported that the Indian billionaire had complained about the cumbersome process required to set up a business in Zimbabwe, where investors move from one agency to another for documents.
“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 then.