Recently Schweppes Zimbabwe Limited commissioned a 1 MW solar plant – a notable feat. However, it has emerged that they have stopped the production of the iconic Mazoe Orange Crush. You probably are wondering why right? I will highlight that in a moment. Well, here is the thing; Schweppes Zimbabwe Limited produces the Mazoe Orange Crush beverage. They source the key ingredients used in the production of the beverage from The Coca Cola Company. So, Schweppes Zimbabwe Limited owes The Coca Cola Company roughly US$10 million. Premised on that The Coca Cola Company has decided to cease supplying the key ingredients needed for producing Mazoe Orange Crush.
A Brief Look At Mazoe Orange Crush Production
I feel it is important to explain a bit on the operational framework under which the beverage is produced. Schweppes Zimbabwe Limited exclusively manufactures and distributes Mazoe Orange Crush. This they do under an operating license from The Coca Cola Company. In fact, other beverage brands produced this way by Schweppes Zimbabwe Limited are Minute Maid and Bonaqua. So I am sure you now get an idea as to why Schweppes sources key ingredients from The Coca Cola Company.
Mazoe Orange Crush Production Has Since Stopped
It is being reported that nothing has been produced in the past 3 weeks. There are concentrates that are needed for the production of the beverage. Those concentrates are what Schweppes gets from The Coca Cola Company. It is from those concentrates that a cumulative debt that is now roughly US$10 million is owed. The Coca Cola Company has resolved to stop supplying Schweppes with the concentrates till it settles the debt.
Legacy Debts Now A Menacing Hurdle
Locally the total combined amount of money owed international suppliers stands at a staggering US$1.2 billion. Schweppes Zimbabwe Limited is just a tip of the iceberg. Foreign currency constraints have been one of the major reasons why local companies have been struggling to source key raw materials. Most of these local companies have been operating on a lifeline by being given raw materials on credit. This is what has led to legacy debts because funds owed have put on interest over time.
Take for instance, the Schweppes scenario, the legacy debt built up over a period of 3 years. This is the same experience for most local companies out there. Off-shore suppliers are no longer taking any chances. These suppliers have been put in a position where they have to stop supplying in order for the legacy debts to be paid. Especially given the current state of the economy it is no surprise that confidence is low.
This is also scaring away potential investors. Normally any prospective investor is keen on investing in a company that has a clean financial record. This essentially leaves companies with legacy debts in a very precarious position. They cannot get new investors and at the same time, they cannot keep getting inventory on credit from their usual suppliers.
The Central Bank Set To Come To The Rescue
The Reserve Bank of Zimbabwe (RBZ) has indicated that it is issuing financial instruments amounting to about US$1.2 billion. The actual payments to international suppliers owed are to set to commence in 2020. This is much needed because companies with legacy debts have literally been grounded. On one side their production capacity has hit rock bottom whilst on the other side they owe millions of US dollars. One of the sad things though is that these scenarios have been brought about by inconsistent and incoherent fiscal and monetary policies. When a business begins to solely rely on borrowing to operate that is a tell-tale sign of deep-seated problems.
Schweppes Zimbabwe Limited recently commissioned a 1 MW solar plant as I said earlier. The project cost US$2 million and it shall be paid in instalments over time. So it is important that the US$10 million owed The Coca Cola Company gets settled soon otherwise the fruits of the solar plant may count for nought. Mazoe Orange Crush is one of Schweppes Zimbabwe Limited’s key beverages. They sell it locally and export to countries like South Africa, Mozambique, Zambia, Botswana and Namibia. Inability to produce the beverage is detrimental to their revenue streams.