Lifeline for bread industry

HARARE - The Grain Millers Association of Zimbabwe (GMAZ) has secured a $5 million loan facility targeted at resuscitating the depressed bread-making industry.

Tafadzwa Musarara, the association’s chairperson, told the Daily News that the bailout package will capacitate players — wheat farmers, millers and bakers — across the value chain, in order to boost supply and stabilise bread price.

This comes as bakers were forced to reverse a 10 percent bread price hike they imposed last December, citing high production costs, following consumer outrage.

Musarara said the high production costs and consequent price hikes were due to “structural challenges” in the industry, particularly for the fewer bread makers, which the facility was going to address.

“We have secured a $5 million facility from MetBank. The money is going to capacitate small millers and bakers by providing them working capital,” he said.

“The money will also be used for retooling and plant rehabilitation of the small players,” Musarara said, adding the facility will be unveiled in a fortnight in Bulawayo — Zimbabwe’s former industrial hub that was most affected by collapse of the bread industry.

Musarara said there were now much lesser players in the bread industry — down from around 120 to below 30.

He said the industry is now dominated by three major players — Lobel’s, Innscor Africa (Innscor)’s Bakers Inn and Marondera-based Proton.

“Millers and bakers have disappeared. This has created structural problems because the big players cannot meet demand.

“Imagine bread is being transported from Marondera to Bulawayo because players there cannot meet demand . . . and that increases the cost of bread unnecessarily,” Musarara said.

“To ensure that we have stable bread prices, we have more players participating,” he said.

“Bread must be affordable to everyone. It is a basic commodity,” he argued.

In Zimbabwe, bread is considered a must-have and an indicator of the economic health of the household.

Musarara said part of the $5 million will be channelled towards flour purchases and revival of the popular Aroma Bakeries, which was a household brand back in the 1990s.

Under the facility, an incubation programme will be implemented, in which qualifying members will be hand-held for six months, then weaned off.

Following the December 2017 bread price increase, the family loaf went for $1,10, up from $1 while a standard loaf sold for $1 from $0,90.

In announcing the price hike, Innscor said: “The price increase has been necessitated by the increase in the price of our major raw materials.”

However, in response, Musarara — representing GMAZ — said the bread price increase could not be attributed “to any increase in cost of flour because there isn’t any increase of that sort”.

“The grain milling industry is deeply shocked by the more than 10 percent increase in bread prices that consumers woke up to on Saturday, December 16, 2017.

“As the suppliers of the major raw material in bread baking, flour, we find the increase unreasonable and devoid of any economic justification,” he said.

“Three weeks ago, on the directive of government, GMAZ published its recommended maximum wholesale and retail prices of maize meal, rice, salt and flour. In that published list, bakers flour had (and still have) maximum price to bakers of $32 per 50kg bag.

“The bakers did not object to this price because it is the same price that has been maintained by milling industry for the past five years.

“In fact, the three big bakers namely Baker’s Inn, Proton and Lobel’s who control more than 80 percent of the bread market, buy at much lower prices than $32 per 50kg bag,” Musarara argued.

He added that consumers have been short-changed during this festive season where demand for bread was at its highest.

“Government has made several interventions which include significant subsidies to wheat prices to millers to ensure that the price of $32 per bag is not breached.

“This practice is consistent with international best practices in other jurisdictions in an attempt to contain food price inflation.

“Accordingly, bakers have a duty to explain the increase to authorities and the consuming publics,” he fumed.

 

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