ECONOMY-ZIMBABWE: Good Policies Make for Good Business

• by Busani Bafana (bulawayo, zimbabwe)
• Monday, August 22, 2011
• Inter Press Service

The presence of an agro-industrial company with headquarters in Zimbabwe on a list of sub-Saharan Africa's 30 best-performing companies might surprise some, but not AICO Africa CEO Pat Devenish.

AICO Africa has taken advantage of favourable agriculture policy across Southern Africa to expand its business, in the process strengthening some 200,000 small scale producers in the region. While the conglomerate has benefitted from the input subsidies programmes in Malawi and Zambia, it has helped cotton and grain farmers access better quality, seed and other inputs such as fertilisers and pesticides. In addition, farmers have used the company's extension services to get improved farming methods, especially for cotton farming in Zimbabwe, Malawi and Zambia.

AICO Africa was incorporated in Zimbabwe in 2008, at the height of the country's descent from a regional bread basket and regional investment destionation to the near-collapse of the economy. Zimbabwe's retrogression, and the consolidation ofpolitical uncertainity was blamed in part to the after effects of the land reforms in 2000 and to the political violence of the 2008 disputed Presidential elections.

AICO Africa's subsdiaries - Cottco, Olivine Industries and SeedCo - are all established names in cotton production, agro-processing and seed production in Zimbabwe, having operated in colonial Rhodesia since the 1950s.

Yet, AICO Africa further defied Zimbabwe's recent political uncertainty to grow its business. It used Zimbabwe as a base to expand into other African countries.

'Expanding beyond our base in Zimbabwe played an important part in AICO Africa's growth and success,' says AICO Africa's CEO, Pat Devenish. 'At the same time, it has benefitted millions of Africans who depend on agriculture for their livelihoods.'

In 1997, the Zimbabwe government, builking to compensation demands by former freedom fighters, unilaterally awarded them ZW$50 000 paychecks, triggering the crash of the Zimbabwe dollar. This was one of several ill advised political decisions - including the introduction of price controlls and new foreign currency regulations - which ignored economic prudence and investment rationale. This made Zimbabwe uncompetetive again its neighbours who put in place policies to woo investors and Foreign Direct Investment.

'When the land reform came, our production platform was destroyed,' Devenish told IPS. 'There was chaos and we had to find a way to keep the company going and it took three years for our strategic business units to start showing profit.'

The company's secret, Devenish said, was the innovative concept of exporting the experience and skills of its people into neighbouring countries after identifying a niche market there.

'Decades of forex shortages and price controls were bad for our business especially Cottco and Olivine Industries, SeedCo was better because it already had a regional presence,' said Devenish. 'Without doubt dollarisation was a good policy for us. I recommend dollarisation to all in the regional countries, it makes its easy to conduct business in terms of moving money across borders, borrowing money and importing capital equipment.'

As part of its expansion, Devenish says AICO Africa brought improved seed stocks to Zambia and Malawi, specifically enabling cotton farmers to increase their yields and get better prices for their produce.

In 2011 Malawi farmers produced 3.6 million tonnes of cotton against national demand of 2.4 million tonnes. In Zimbabwe, AICO Africa has set aside 200 million dollars to buy cotton, expected to exceed 200,000 tonnes.

'As business leaders we must continue to work with governments to ensure that the right policies are in place for increased business expansion and cross border economic development,' urged Devenish, who took the helm at AICO in 2010.

Devenish is a member of the Frontier 100 network, an IGD programme connecting successful CEOs operating in frontier and emerging markets with leading CEOs from the United States and Europe to share experiences to grow businesses and increases opportunity for people in developing countries.

AICO Africa was named in 2011 as one of top 30 performing MNCs in an Africa wide survey report, Pioneers on the Frontier: Sub‐Saharan Africa’s Multinational Corporations. It was among a group of Sub-Saharan corporations which grew at an annual rate of almost 30 percent from 2006 to 2009, far outpacing their global competitors, including Standard & Poor’s 500 biggest American firms.

'This report provided a unique snapshot of a range of African companies that have experienced remarkable growth in spite of regional political barriers and global economic challenges,' said Jennifer Potter, President & CEO of the Initiative for Global Development (IGD).

The criteria used to decide the contribution made by the companies to development included

A new policy such as the Statutory Instrument 2008 on cotton marketing, is an example of how policies can benefit Zimbabwean companies and their small scale partners.

Economic commentator Eric Bloch, said economic and political stability - for a long time in short supply in Zimbabwe - was the lifeline for any business operation, including MNCs.

'Good international credit ratings arer important to any business operation because that enables companies to access international lines of credit,' said Bloch. 'Zimbabwe is currently a credit risk and few international agencies are willing to rate it, besides, the political and economic environment is not assuring to investors.'

Citing the cotton industry as a significant source of income and provider of jobs, the Zimbabwe government will prioritise the clothing and textile sectors in the Industrial Development Policy being crafted.

Director of Enterprise Development in the Ministry of Industry and Commerce, Stanislaus Mangoma, told delegates at a Southern African Regional Cotton, Textile and Apparel meeting in Harare recentips invoicely that the textile sector needed morden equipment to add value to the country's cotton.

'The clothing value chain is one of the longest value chains in the world with great potential for food security, job creation and building base for industrial development,' Comesa regional agro-foods co- ordinator Angela Mulenga, told participants at the same meeting.

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service

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