Cottco, which includes the main cotton buyers and processors in which the government holds a majority stake, paid $6.8 million for Heinz's 51% 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 Pittsburgh-based Heinz, best-known for its namesake ketchup, beans and soups.
"This sale is another step in the company's global strategy to drive profitable growth and innovation in three core categories where Heinz has strong brands," Heinz spokesman Michael Mullen said Monday in a statement. "The decision to sell the business was only taken after a comprehensive review of all strategic options."
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, on Monday, that the Heinz deal was the first in a much publicised programme 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% of their ownership to black Zimbabweans, a campaign the government calls "indigenisation."
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 scrutinised by a legal committee of lawmakers.
Zimbabwe's economic meltdown has made doing business here a challenge for both local companies and foreign investors.
In June 2006, Heinz took a charge to write down its investment in Zimbabwe because of the "continuing uncertainty regarding the stability of the currency and economic conditions in the country," the company said in its statement.
Official inflation is given as 7,634%, though independent estimates put real inflation closer to 25,000%. The International Monetary Fund has forecast inflation reaching 100,000% 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 Olivine to concentrate on its core international brands and move away from Olivine's fats and cooking oils.
The state Herald newspaper on Monday claimed the company was ordered to scale down production by the US government under Western economic sanctions against Zimbabwe.
Company executives, however, have said a decline in production to less than 30% of capacity was the result of the nation's economic problems following 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 five-fold since the farm seizures began with potential investors mostly citing uncertainty over ownership rights and government intervention in businesses.
Article courtesy: http://newzimbabwe.com/index.html
