Milling industry crisis deepens

THE country’s milling industry is in crisis, with players reporting an uncertain outlook as maize and wheat output decrease to alarming levels, raising doubts over the ability of local millers to meet demand.Zimbabwe millers, who have been grappling with an acute shortage of wheat and maize stemming from the decline in the agricultural sector since the turn of the millennium, are now importing at least 70 percent of their grain requirements.
The industry has also been hit hard by the unavailability of affordable financial resources to fund operations, a significant factor negatively impacting the continued viability of the milling industry.

Where loans have been secured, they have been attracting punitive interest rates due to the liquidity challenge.
Erratic power supplies and high production costs are also placing additional strain on the millers who are already in dire straits.
These challenges have led to a spectre of closures with the industry last year alone witnessing more than 10 milling companies going bust, throwing tens of thousands of workers onto the streets.

The industry has recorded some of the highest company closures in the country, with records from the Grain Millers Association of Zimbabwe (GMAZ) showing that the number of players has gone down from 310 in 2008 to 62 as at December 31, 2013.

Those that have survived this far have scaled down capital expenditure and, across the board, there is a shift from maximising value by increasing production volumes to a renewed focus on maximising returns from existing operations through managing productivity and improving efficiencies.
GMAZ chairman, Tafadzwa Musarara, said the milling industry was in a crisis.
“We are still in troubled waters and this has been worsened by government’s policy inconsistencies in terms of maize imports,” Musarara said, adding that the industry needed heavy retooling which comes at a very high cost.

Local millers are currently operating at less than 50 percent of their capacity.
Most worrying, the threat of cheap imports eating into the Zimbabwean market share is looming large, and it is high time the government initiates policy changes to prevent a severe crisis.

Finance Minister, Patrick Chinamasa, indicated in December that maize output was estimated to decrease to about 798 500 tonnes in 2013, from 968 041 tonnes in 2012. This was on account of a reduction in area planted, from 1 689 786 hectares in the 2011/12 season to about 1 442 845 ha in the 2012/13 agricultural season.
The poor quality of the season and the challenges related to input supplies and their affordability, Chinamasa said, also contributed to the decline in yields from approximately one tonne per ha in 2011/12 to about 0,63 tonnes per ha.
Wheat production was estimated to have declined from 33 700 tonnes in 2012 to about 24 700 tonnes in 2013 stemming from declines in the area planted from 11 600 ha in 2012, to around 8 500 ha in 2013.

Official figures from the Ministry of Finance and Economic Development show that it costs approximately US$1 200 to grow a hectare of wheat in Zimbabwe against US$230 in Ukraine, US$580 in Russia and US$600 in Australia.

National Foods (Natfoods) chief executive officer, Jeremy Brooke, confirmed fears that the milling industry was in jeopardy.
“The impact of imports means that we don’t run the factories as well as we should. It is very destructive to us and also to the country,” said Brooke.
The country’s largest cereal and grain miller, NatFoods has, however, invested about US$30 million in new flour mills to increase production and improve efficiency.
With Blue Ribbon having ceased trading some year ago, and funding constraining output from CFI’s Victoria Foods, NatFoods continues to grow its market share.
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