Savanna plans $2m Moza plant

HARARE - Cigarrette maker Savanna Tobacco (Savanna) plans to invest €1,5 million (about $2 million) in the construction of a packaging plant in Mozambique.

The project is part of the manufacturer’s regional expansion plan targeting southern Africa.

“We have been exporting a lot of finished cigarettes into Mozambique but I think with the size of the market… we see an opportunity to start also packing some of our local cigarettes within that environment,” said Adam Molai, the group’s executive chairman, after a familiarisation tour of Savanna’s Harare plant by Information minister Jonathan Moyo.

He said the move would allow closer proximity to the growing Mozambican market. Mozambique’s economy is currently booming largely spurred by its abundant natural resources.

This has created a large and growing market for fast moving consumer goods.

Over the past decade, Savanna exported 85 percent of its cigarettes to Botswana, Zambia, South Africa and Cyprus among other counties and has built a production capacity of over 4, 5 billion sticks annually and currently operates at around 70 percent capacity utilisation.

The group faces competition from British American Tobacco and Breco.

Recently, it invested over $5 million in acquiring equipment that packages cigarettes in smaller quantities of two and five sticks to cater for the lower end of the market.

“Our research has shown that in Africa 60 to 70 percent of consumption is in sticks, what we commonly refer to locally as mudzanga... this has had a major impact on the market because we are giving people and the market products that are aligned to how they consume,” said Molai.

“Our thrust is to grow our African footprint and become, within the next ten years, the second largest manufacturing and marketing company on our continent,” he said, adding that since upgrading from exporting raw tobacco to manufacturing cigarettes, the group’s earnings have increased tenfold.

“There is a big opportunity in the tobacco industry… we have been processing tobacco into cigarettes since 2002,” Molai said.

Early this year, Savanna secured vending licences for its hawkers from the Harare City Council, meaning the company has passed the test for its statutory instrument (SI) 264 of 2002 compliance measures.

The development comes after a four-month stand-off between the company’s vendors, police and municipal authorities.

Although Savanna came into existence well after the key legislation was enacted, company chief operations officer Tongesai Zvaravanhu recently said they were committed to ensuring that all its business and operational facets were within the law.

“Savanna has become the first cigarette company in Zimbabwe to support its vendors (in this way), thus demonstrating its commitment to empowerment, compliance and its consumers,”  he said.

“Savanna (and presumably Breco) remains one of the few companies… to provide legally compliant products to the stick market, which accounts for 60 percent-plus of cigarettes sold in Zimbabwe,” Zvaravanhu said, adding the measures were aimed at “legalising their service and keep helping their key stakeholders to continue earning a decent living” after the recent crackdowns.

The licensing programme, which is set to benefit vendors in Harare’s high density suburbs, are valid for one year.

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