ECONOMY-ZAMBIA: Coca Cola Packs Its Bags

By IPS Correspondents Reprint | | Print |

Anthony Mukwita

LUSAKA, Sep 15 1998 (IPS) - The Zambian government’s decision to stand up to the multinational soft drink manufacturer Coca Cola has won it both applause and criticism from the business community, as the multinational prepares to pack up its million dollars investment.

Coca Cola announced earlier this month that it would pull out of Zambia, because the government of President Frederick Chiluba had backtracked on an earlier decision to grant the soft drink giant a five percent excise concession.

The multinational argued that producing its products on the existing 25 percent excise duty would be unprofitable.

Some sections of the business community slammed the government for trying to behave like David and stand up to Goliath, arguing that a poor country like Zambia could not afford to challenge multinationals that want to invest and create jobs.

But others gave the government a pat on the back saying it is high time governments stood their ground against big businesses that want to recolonise African countries just because the countries need investments that will create jobs.

The Zambian government and Coca Cola have been at loggerheads over the 25 percent excise duty since May. The soft drink giant threatened to leave the country then, and hiked the prices of its soft drinks from 25 US cents to 50 US cents.

But after protracted talks with government officials, the multinational dropped the price to 25 cents on condition that the Zambian government gave it a tax incentive on raw materials.

Zambia’s minister of commerce and industry offered a five percent tax incentive, but President Chiluba squashed this saying that the offer had been given by the “wrong ministry” and had been referred to the Zambia Revenue Authority.

Coca Cola, in retaliation, hiked its prices again and then said it would pull out of this Southern African nation.

Prominent Lusaka businessman Namakando Wina described Coca Cola’s cry for a tax concession as “a cheap tactic of multinationals whenever they are trying to cheat an economically weak country”.

“They could have recovered the money they claimed they would have lost from operating on a 25 percent duty from their operations in countries like China, where they have invested billions, instead of the millions of dollars they wanted to invest in Zambia,” Wina said.

“Why should the government jump whenever they dangle the carrot? These are the usual tricks of international companies. They always want it easy.”

Another Lusaka businessman Francis Mukuka blamed the government for the investment fiasco. “I can’t blame Coca Cola…the government, as usual, went on the negotiating table as a weak partner,” he said.

“Coca Cola was offering what at that time appeared like a good development deal, when they said nine percent, the government said ‘no sir, we will actually give you five percent, because you will be creating jobs for our poor people’. Weak economies are fond of selling their countries for a song,” Mukuka added.

Another businessman interviewed noted that poor countries’ governments often receive very little from investments made by giant corporations.

“These same foreigners the government favours leave very little investment in the country. A good example is that of South African firms that were given rebates when they came to Zambia…They underpay their workers and take the money back to South Africa,” he said.

Zambian economist Gilbert Mudenda joked during a recent interview that: “Liberalisation has made Zambia the greatest exporter of foreign currency.”

“Big companies come here, make their money and send it out leaving us poorer than we were before they even came here, apart from a few low paying jobs,” he said.

Some sceptics believe that before Coca Cola finally packs up and leave, the government may fall on its knees and give the multinational what it wants to save 15,000 jobs and the 75 million U.S. Dollar investment.

But independent management consultant Jetty Lungu believes that bowing to the wishes of multinationals is not worth the trouble financially.

“Firms like Coca Cola come and go. You give one of them a concession, another international company will learn about it and in the end, you will end up tied in so many deals that don’t benefit your locals…,” Lungu told IPS.

ECONOMY-ZAMBIA: Coca Cola Packs Its Bags

By IPS Correspondents Reprint | | Print |

Anthony Mukwita

LUSAKA, Sep 14 1998 (IPS) - The Zambian government’s decision to stand up to the multinational soft drink manufacturer Coca Cola has won it both applauds and criticism from the business community, as the multinational prepares to pack up its million dollars investment.
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