Swiss food giant Nestle SA has announced that it would close its factory in Kinshasa, the Democratic Republic of Congo (DRC), a potential market of 80 million but one plagued by poverty and political instability.
“We will close our factory and offices by the end of January and continue developing our economic distribution model through third parties,” a company spokeswoman said.
The company said that 120 employees will be affected by the closure but pledged to offer them “a series of compensatory measures more favourable than required by local labour laws,” she said.
Nestle entered the DRC market in 2009 with 15 million Swiss francs ($15 million) investment to produce Maggi Stock cubes but has been posting losses ever since.
But Nestle is not alone in the contextual economic difficulties with operating in the DRC. Bralima, Heineken NV’s DRC subsidiary and the country’s largest brewer with a 90-year history announced in October it was embarking on a reorganization of its business to cut costs because of the country’s high taxes and continuing economic slump. In 2016, the brewer shut two of its six breweries and took an asset impairment charge of €286 million ($336m) citing general increase in the cost of doing business. Those costs include a 50% increase in excise duties, 20% rise in water and electricity tariffs, flow of cheap imports including beer and soft drinks from neigbouring Angola and a 41% depreciation in the Congolese francs.
While minerals rich DRC has tried to attract foreign investments to grow its industrial base and become less reliant on exports of Copper, Tin, Cobalt and Colton, which is used in electronics manufacturing, the country is beset by grinding poverty and a political crisis caused by President Joseph Kabila’s refusal to stand down at the end of his term in December 2016. While the country is scheduled to hold elections in December 2018, the opposition is demanding the president step down sooner. Anti-government demonstrations have since paralyzed the country.