via Reckitt closes Zim factory | The Herald January 7, 2014 by Martin Kadzere and Tinashe Makichi
RECKITT Benckiser, the manufacturer of Nugget shoe polish, Dettol and Cobra floor polish has closed down its Harare plant amid fears that many local manufacturers may fail to re-open after the 2013 annual shut down due to economic challenges. An official at the companytold Herald Business yesterday that the company would now distribute its products through DPack, one of its merchandising partners.
The local firm is a subsidiary Reckitt Benkiser plc, a London Stock Exchange-listed company.
The local unit started scaling down its operations since last year August and finally stopped operations towards the end of the year. It employed about 50 permanent workers.
“Reckitt Benckiser started scaling down operations on August 31 last year and since then the management has been doing finishing touches to conclude the closure of the Zimbabwean unit,” said a senior manager who requested anonymity.
“One of our merchandising partners DPack on Sunday vacated the complex taking all their belongings to go back to their base in Msasa. Now that Reckitt has closed down, DPack would be the distributing agent of Reckitt’s products, since all the products would now be supplied from its parent company in South Africa.”
The manager said about 50 employees including senior managers would receive packages and the issue was now under the jurisdiction of the National Retrenchment Board.
“We are hoping most workers would have received their packages by the end of this month,” the source said.
No official comment could be obtained from the company by the time of going to print yesterday.
Zimbabwe is facing its worst de-industrialisation since independence, as most companies have closed shop while others have significantly scaled down due to economic challenges.
Many companies across the country have closed down, with Bulawayo and Manicaland being the hardest hit.
Investment into the country has not reached the levels necessary to sustain economic growth. This deterioration in the economy has seen capacity utilization in the manufacturing sector coming down from 44,9 percent in 2012 to 39,6 percent last year.
The country has remained unattractive to international financing, largely due to negative perception and an external debt estimated at about US$6,1 billion. This has resulted in the unavailability of sustainable long-term funding to revive companies, with the available short-term loans being too expensive to sustain the recovery of the manufacturing sector.
The situation has been worsened by Western countries’, angered by the country’s programmes to bring the majority into mainstream economic activities, spirited campaigns against setting up of new businesses or expanding existing operations in the country.
This has resulted in the country’s manufacturing base shrinking to the extent of reducing the country into largely “a nation of traders”. According to Finance and Economic Development Minister Patrick Chinamasa, the trade deficit would widen this year, with exports expected to reach US$5 billion from US$4,4 billion last year against imports of US$8,3 billion.
The net effect of this has been a debilitating liquidity crunch which has worsened the operating environment for companies operating in Zimbabwe. The liquidity crunch, which started towards the end of 2011 has gradually worsened in 2013 resulting in several companies collapsing and many more struggling to meet their costs especially staff costs.
Company closures have hit all sectors of the economy. According to the Confederation of Zimbabwe Industries many companies have closed down in Zimbabwe in the last three years with a marked increase in closures recorded last year.
The July 2013 National Social Security Authority Harare Regional Employer Closures and Registrations Report for the period July 2011 to July 2013 shows 711 companies in Harare closed down, rendering close to 8 500 individuals jobless.
Industry players have since raised a warning sign that some companies may fail to re-open after the 2013 shutdown.
“We are yet to receive confirmations, but the indications that we got towards end of last year from some of our members was that they may fail to re-open,” said an official with the Confederation of Zimbabwe Industries.
“Some were intending to abandon production, preferring to outsource finished products.”
CZI president Mr Charles Msipa told this paper recently that about 50 percent of its members were no longer producing, preferring to import finished products for resale locally.