Heinz sells plant to government

The executives said the deal was in negotiation for months.

PITTSBURGH (AP) — Pittsburgh-based food giant H. J. Heinz Co., one of Zimbabwe’s first major foreign investors, sold its Zimbabwe interests to a government-controlled cotton company, the buyer said Monday.

Cottco, the main cotton buyers and processors in which the government holds a majority stake, paid $6.8 million for Heinz’s 49 percent stake in Zimbabwe’s Olivine Industries, makers of fats, edible oils — some from cotton seed — and soaps.

The government previously shared ownership of Olivine with Heinz.

Executives at Heinz, of ketchup, beans, soups fame, referred a reporter seeking comment to the Cottco announcement.

Cottco, formerly the state Cotton Marketing Board, said in a statement the Heinz buyout would add “critical mass” to Cottco, allowing it to diversify.

Industry executives dismissed reports in the state media Monday that the Heinz deal was the first in a much-publicized program by the government to take over white-controlled businesses.

The executives said the deal was in negotiation months before plans were announced by President Robert Mugabe earlier this year to force all businesses to relinquish 51 percent of their ownership to black Zimbabweans, a campaign the government calls “indigenization.” Plans were unveiled in the Harare Parliament last month and are scheduled to be passed by the ruling party-dominated legislature soon after the draft has been scrutinized by a legal committee of lawmakers.

What’s been happening

Zimbabwe’s economic meltdown has made doing business here a challenge for both local companies and foreign investors.

Official inflation is given as 7,634 percent, though independent estimates put real inflation closer to 25,000 percent. The International Monetary Fund has forecast inflation reaching 100,000 percent by the end of the year alongside a thriving black market in scarce goods.

The government has ordered businesses to cut prices in a bid to curb inflation, but many producers and retailers say that means selling for less than production or wholesale costs.

Heinz, one of the first major foreign investors after independence in 1980, last year restructured its role in Olivine to concentrate on its core international brands and move away from Olivine’s fats and cooking oils.

The state Herald newspaper, a government mouthpiece, claimed Monday the company was ordered to scale down production by the U.S. government under Western economic sanctions against Zimbabwe.

Company executives, however, have said a decline in production to less than 30 percent of capacity was the result of the nation’s economic problems after the government-ordered, often-violent seizures of thousands of white-owned commercial farms that have disrupted the agriculture-based economy since 2000.

According to the state central bank in Harare, direct foreign investment has declined fivefold since the farm seizures began with potential investors mostly citing uncertainty over ownership rights and government intervention in businesses.