Recently the National Bakers’ Association of Zimbabwe (NBAZ), an umbrella body of the country’s major bakeries, ushered in new leadership. However, the baking industry is still faced with a plethora of challenges, especially power outages and water shortages. In order to get a perspective of the current state of the industry and the future of the sector, The Sunday Mail Business (SMB) sat down with the new NBAZ president, Mr Dumisani Moyo (DM), for his insights.
SMB: You were elected to lead the NBAZ at a time when the business sector was battling to survive. Please outline your plan to ensure bakers remain afloat.
DM: In the period under my leadership, the association shall vigorously pursue training of its members and employees to improve skills in the industry.
Information gathering and dissemination shall be intensified to allow members to make informed decisions and access required information easily. To this end, we shall as well intensify efforts on regional integration to enable ourselves to share notes and strategies with our colleagues in the SADC region. Of note will be our co-operation with the South African Chamber of Baking.
Within its means, the association will carry out research for the benefit of its members and other stakeholders, and will also engage relevant arms of Government and other stakeholders to address the critical issue of funding for members.
We shall also harness the efforts of the members to deal with troublesome issues such as utility charges. Also, the association will actively seek to re-profile the baking industry and actively cultivate a harmonious working relationship with other stakeholders such as the Grain Millers’ Association of Zimbabwe (GMAZ). At the moment, we appear like we are working at cross-purposes, yet we ought to be singing the same tune. We will also actively participate in bodies such as CZI and
EMCOZ for the general good of our members.
SMB: What is the situation in the baking industry at the moment?
DM: Capacity utilisation in the baking industry is sitting at about 44 percent. Bakeries are sitting with a lot of underutilised capacity; bakeries are battling with lack of funding for working capital.
SMB: In your opinion, what do you think the sector must do to boost capacity utilisation?
DM: The sector is working on accessing funding meant for distressed companies. Others have started looking into options of technical partners who can inject capital. If the situation remains dire as it is, one can not rule out the possibility of big fish swallowing the small fish. It is clear that a few others will go under as well.
SMB: But, Mr Moyo, what really are the challenges faced by bakers?
DM: Electricity outages and cost have created huge challenges for the baking industry. Generally, the production costs are reaching unsustainable levels. Raw material costs have greatly appreciated. Labour costs have increased by 120,4 percent since the introduction of multiple currencies.
Not very long ago electricity went up by 31 percent. This is worsened by the fact that the price of bread has remained a dollar since the introduction of multiple currencies. Funds to recapitalise businesses have been hard to come by, forcing a number of our members to go under. The majority of our members are operating from rented premises. Rental costs have continued to skyrocket. Dwindling disposable incomes are also shrinking the market and threatening the viability of the industry.
SMB: At the time when the industry was performing well, how many bakeries did we have in the country and what was your membership?
DM: It has always been difficult to tell how many bakeries there has been in the past because some never registered with our association, but still legally operated bakeries. It is, however, believed that at one time we had in excess of 300 bakeries countrywide.
At the peak of the industry, we had a membership of 136 bakeries. This number, as earlier mentioned, has declined owing to folding of some of the bakeries.
Some bakeries remained non-committal as regards their belonging and this I am pretty certain this applies to any other industry.
SMB: How many members have left the organisation so far and what have been the major reasons for leaving?
DM: Our organisation has only lost members whose businesses folded. None of the bakeries that are still operating joined and then later left our association. We are the sole employer representative at NEC (National Employment Council (NEC); thereby, negotiating wages for the whole industry.
We have participated at NEC and you will find our papers in Cabinet files. So, you are not talking about an organisation that emerged from nowhere and has no clear agenda. With a history dating back to the 1940s, you will appreciate that we have stood the test of time. Our members know what they stand to benefit from NBAZ and even when they are quiet they still belong and support their association.
SMB: Mr Moyo, are flour imports helping or affecting the baking industry?
DM: Against the background of limited local wheat supply, the industry has depended a great deal on flour imports. Besides the quantity, there has been an issue of quality of local wheat and flour thereof. The industry generally blends local and imported flour to get a better product. I must, however, state that local flour prices are not competitive.
Regardless of this, the bakers have continued to buy local flour largely to support local milling industry, promote job creation in the economy and generally promote Buy Zimbabwe.
SMB: How can Government help improve operations of the sector?
DM: Duty on imported flour is hurting the baking industry and any further duty increase will worsen an already bad situation. We need policy that promotes the survival of the industry. The industry is not clear yet on the operations and accessibility of Dimaf. We look forward to the fiscal review and national budget for policies that stimulate growth in the general economy to improve consumption of our products. We expect Government to rein in other stakeholders to contain the price of raw materials, particularly local flour, so as to arrest run-away costs.
SMB: Some quarters argue that it is no longer viable to sell a standard loaf of bread at $1. What is your reaction to this?
DM: This is the reality the industry has had to live with for a while. Escalating operational costs have long rendered the ruling price of a loaf not viable. The bakers have been seeking to accommodate the challenges faced by the market, taking cognisance of the customers’ inability to absorb a higher price. Definitely, a dollar is no longer a sustainable selling price for a loaf of bread.
Even approaching financiers to seek capital is sometimes scary because the revenue generation capacity is greatly reduced by the selling price of the loaf.
It shall be noted that a dollar is the retail price. Bakers sell a loaf for much less than a dollar to the retailers.
SMB: We understand that there is a new salary structure for employees in the baking industry. Tell us more about this, including how much the lowest paid employee is getting.
DM: Total cost of employment for graded staff went up by 16 percent with effect from May 1 2012. In the period January 2012 to April 2012, labour costs also increased by 4 percent. This has brought the minimum wage in the industry to US$216.
This figure excludes allowances. It should be noted that these wages have come against the background of projected annual inflation of 5 percent. Whilst we would have wanted better for the men and women who keep the wheels of the system turning in the industry, we need to be also realistic about what we can afford to pay and what the national economy can carry by way of salaries.
Our research has indicated that we are fairly comparable in the SADC region and that gives us a degree of comfort.
SMB: There were court battles between the NBAZ and another body claiming to represent bakers (BAZ) led by Mr Wellington Peyama. How have these battles affected your operations?
DM: These legal battles have just been a petty, irritating pain, which generally has not had an impact on our operations. NBAZ has stood the test of time and cannot be shaken by a fly-by-night association led by a rented president. NBAZ is composed of gentlemen and ladies who came into the industry not by accident or to pursue petty opportunities, but who came into the industry for the love of baking and to meet the nation’s requirements on bread and related products. BAZ (Bakers’
Association of Zimbabwe) are our little brother; we are more than ready to hold their hand and show them around, only if they ask for it. It may be of interest to the public that NBAZ has won all the legal battles it has been drawn into by the association you have referred to. As an association, we remain focused on our primary duty and will not be swayed by these battles, however big they may become.
SMB: Can you share with us your views about winter wheat cropping in the country, especially this season, and the projected impact on your industry.
DM: We have engaged the GMAZ with a view to ascertain their capacity to meet baking industry flour requirements and in these interactions it has been our understanding that the hacterage under wheat is quite small and won’t be enough to meet the needs of the bakers. We, thus, believe that imports will remain by and large the only way to keep the baking industry going.
SMB: How are power and water cuts affecting the sector?
DM: As I have already indicated earlier on, power outages and water cuts have reduced productivity in the industry. They have in a major way contributed to the shutting of shop for some bakeries. Bakeries, like the rest of the manufacturing sector, have been forced to procure generators to supply power during power cuts.
This is a cost others have failed to meet. Generators require service and maintenance and are running on fuel, which is an additional cost. This affects viability of businesses.
SMB: The Confederation of Zimbabwe Industries (CZI) has been complaining of high electricity and water charges. How have they impacted on production?
DM: Power and water charges have rendered operations unviable. The huge utility bills have created profitability challenges for our members. As earlier indicated, this is an industry whose margins have already been compromised by escalating costs all round and these have not helped the situation at all.
SMB: What does the future hold for the baking industry?
DM: For as long as the current situation prevails, the industry viability will remain threatened; jobs will continue to be threatened. We are hoping that lines of credit will be opened to allow bakers to recapitalise businesses. Bakers who are still in the playing field are committed to feeding the nation and will continue to do whatever is possible to ensure bread is on the table for every family in Zimbabwe.