Delta Corporation’s decision to charge for all its products in hard currency from tomorrow sends a worrying signal about the corporate giant’s attitude towards the market which, to all intents and purposes, means consumers will have to pay in kind.
Context is key. Delta is a local company whose inputs are made and paid for locally: grains, sugar, water, electricity, fuel for its vehicles, services, taxes, salaries and wages it pays for its staff.
Imports are limited to flavourings — hops for clear beer and concentrates for soft drinks — plus raw materials for its packaging. These amount to a modest fraction of its total costs.
A glance at the supply chain does not support Delta’s claim that it needs 100 percent foreign currency for its products. For clear beers, the ingredients are maize, barley, hops and water; of these ingredients only hops, the smallest input, is imported. For opaque beers, the ingredients are sorghum and water, both bought in Zimbabwe. For carbonated drinks, the main ingredients are water and sugar, both local, with flavourings being the only import.
Packaging is made of largely imported raw materials, ever since Delta decided to abandon reusable glass bottles. But the manufacture of the modern plastic and metal packaging is done in Zimbabwe using Zimbabwe labour and electricity. In any case Delta had been showing some innovation by returning to reusable glass bottles, something environmentalists strongly suggest was a route to follow.
Delta has grown out of one of the first industries set up in Zimbabwe, when the main Cape Town brewer opened a subsidiary in Harare because it made economic sense to use local raw materials with just a tiny imported content. And Delta and its predecessors followed that local inputs route religiously for decade after decade, ensuring that the farmers who supply most of their raw materials were supported.
We would understand if Delta had to raise its prices moderately because it had to pay more for some of these foreign inputs. We have seen some price increases from other Zimbabwean companies, including those in the local beverage manufacturing sector facing this problem, but they behaved rationally.
Delta have decided on another route: to cheat their customers, cheat the farmers who grow almost all their raw materials, cheat their other local suppliers and cheat their workers.
So extreme is the Delta move that some will wonder if the company’s directors do not have other motives — including political motives. A beer monopoly is a powerful instrument, and perhaps Delta’s directors think this can be used for other ends, but in any case it does not matter.
We believe that consumers can use their power to engage Delta. As we report elsewhere in this issue, at least 99 percent of Zimbabweans get their salaries in Bond notes or RTGS. Supplies will be tight for a couple of weeks while alternative suppliers are found, but Zimbabwean businesses are nothing if not innovative.
The Government can use its regulatory authority to deal with monopolies and can assist competitors prepared to follow the rules.
Tax adjustments can affect Delta’s protected position, protection that it has now abused, and local and foreign investors can be encouraged to move in for long-term substitutes for Delta products.
However, it appears it has already thrown down a gauntlet and believes it can beat Zimbabwe and Zimbabweans. The company might need to rethink.
Source : The Herald