Harassed Nestle halts Zimbabwe operations

Nestle said it received an unannounced visit from government officials and police on December 19 and was forced to accept a milk delivery from non-contracted suppliers. Two of its managers were questioned by police and released without charge the same day.

Since under such circumstances normal operations and the safety of employees are no longer guaranteed, Nestle decided to temporarily shut down the facility, the world's largest food group said in a statement.

The decision marks a setback for the unity government formed by Mugabe and Prime Minister Morgan Tsvangirai, his old rival, in an effort to persuade foreign investors it is safe to return and help rebuild a state ruined by a decade of decline.

Speaking in Harare on Wednesday, Zimbabwe's finance minister said continued political uncertainty was holding back growth.

WORK PERMIT

Nestle stopped buying milk from Gushungo Dairy Estate in October following international criticism of a deal agreed in February. The farm had been seized under Mugabe's controversial land reform program.

At the time, Nestle said its business with the farm accounted for 10-15 percent of its local milk supply and that it had a long-term commitment to Zimbabwe.

A source familiar with the situation said Nestle officials, including expatriate managing director Heath Tilley, had come under pressure since the decision to stop buying from the farm. The source said police had indicated there might be problems with Tilley's work permit.

Critics blame Mugabe's seizure of white-owned commercial farms to resettle landless black Zimbabweans for ruining the southern African country's once prosperous economy. His opponents also say the main beneficiaries have been ruling party loyalists rather than the poor.

The veteran leader, in power since independence from Britain in 1980, denies the accusations, saying the economic crisis was caused by sanctions imposed by Western countries opposed to his land reforms.

Mugabe formed a power-sharing government with Tsvangirai in February to resolve a political crisis that deepened following disputed elections in 2008.

It has managed to restore the economy to an estimated rate of growth of nearly 5 percent this year after a decade of decline.

But Finance Minister Tendai Biti, a Tsvangirai loyalist, said that rate could have been higher if there had been more progress with the reforms to increase political and economic freedoms that Western donors are demanding as a condition for renewed support.

If it wasn't for the uncertainty of the political agreement, we would have achieved an annual growth rate of 11 to 15 percent in the next three years, he said at the launch of an economic blueprint in Harare.

(Additional reporting by Pascal Schmuck in Zurich; editing by John Stonestreet)