Case 1.0 Imported Juice Helps To Kill Off Moonsplash

A fruit juice processor, Moonsplash, has stopped production of juices following declining business, leaving 15 people without employment.

Company director Mr. Michael Willmore said production ceased at the end of last month, adding that the Moonsplash range of fruit juices would be available over the next four months until remaining stocks had been exhausted.

The factory had, since its establishment in 1984, processed a variety of fruit juices for the Zimbabwean market.

Mr. Willmore said high transport costs as well as competition from imported products had affected the viability of the company, which had been established in Masvingo in response to Government calls for industry to decentralize.

"The introduction of (imported) products into the Zimbabwean market rapidly eroded our market share from over 1 million liters to a mere 450 000 litres annually. By simple statement of fact, Moonsplash was not viable on the reduced volume." He also criticized the lack of incentives in Masvingo, particularly for new investors.

*In my opinion, both central government and local municipal authorities will have to offer industries more attractive incentives to invest En Masvingo", he said. He said incentives such as lax exemptions offered at growth points and Export Processing Zones (EPZ) would he more ideal for Masvingo because it was well located from the Mozambican port of Beira as well as South Africa.

This made the town an ideal location for EPZs.

Mr. Willmore, however, added that the demise of Moonsplash was more complicated than more proximity to major markets.

"The company desperately needed to make me transition to aseptic packaging, a technology which enables fruit juices to be processed without the use of chemical preservatives white providing an unrefrigerated shell life of six months,

The innovation would have greatly enhanced the product and provided export potential, but regrettably, cashflow constraints within our holding company (Afdis), combined with high interest rates, made the $5,8 million investment unviable".

1. What problems arises from the case above? Mention only two:

2. Does the problem also effect the national income determination of the country? how?