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Closures in baking industry loom

Business Digest
Analysts said the price of bread had triggered a public outcry, with millers attributing the hike to erratic wheat supplies due to the Russia-Ukraine war, but bakers say the issue of unaddressed economic challenges remains the main factor crippling the sector.

FREEMAN MAKOPA THE potential closure of baking companies is looming as authorities fail to address key challenges facing the industry.

Analysts said the price of bread had triggered a public outcry, with millers attributing the hike to erratic wheat supplies due to the Russia-Ukraine war, but bakers say the issue of unaddressed economic challenges remains the main factor crippling the sector.

National Bakers’ Association of Zimbabwe (NBAZ) president Dennis Walla said the changes in exchange rates continued to impact on the business, hence might trigger increases in products or force some baking companies to close.

“As long as movements of exchange rates are happening, there are things that we can’t control, so it becomes problematic to predict whether the prices will change or not,” Walla told businessdigest this week

“We are doing the best we can but obviously if there is finger-pointing saying the prices are not justified or you don’t want to increase prices then that’s when someone will say I am unable to continue since it’s no longer viable.”

Walla also revealed that currency volatility had hit the sector, a situation which has seen raw material prices increasing, adding that engagements with the government on several issues have been ongoing.

“So you find that all our key raw material prices go up on a weekly basis and some of the costs our members were able to absorb but there are others which cannot be absorbed. The challenge is that flour is scarce these days and if you manage to acquire it, its prices on a weekly basis would be changing. That’s the challenge we are facing at the moment,” he said.

“There was a statement, which was released by the Grain Millers Association of Zimbabwe (GMAZ) recently when we had a shortage of bread and it noted that one of our major players, National Foods, had stopped milling.

“That obviously affected the industry because our members could not access the product. There are various factors affecting the sector but the issue of raw materials is the major one because remember the issue of exchange rate changes is affecting our suppliers.

“Then there is load shedding; it means we have to supplement with generators which becomes costly,” Walla added.

However, the government’s failure to provide Real Time Gross Settlement (RTGS) fuel and the increase in United States dollar fuel prices has further increased the cost of producing bread.

In April this year, GMAZ increased the prices of maize and wheat by 50% and 17,8%, respectively.

This further increased the cost of producing bread.

According to GMAZ, the country was currently consuming 16 000 tonnes of bread flour per month and approximately 1,2 million loaves of bread per day.

Zimbabwe will require to import 155 000 tonnes of wheat to mitigate the variance between local production and national demand.

Walla said there was a negative perception that the sector was profiteering yet the pricing is based on cost build-up mechanism.

Players in the sector said they have been engaging the government to highlight issues affecting the industry so that there are policy interventions.

“The subsisting global food inflation crisis is causing serious headwinds and Zimbabwe is not spared. Similar price increases of maize meal and bread flour are also being experienced in other regional countries such as Botswana and South Africa,” GMAZ said.

The local bakery industry continues to swim in turbulent waters as more companies fold operations due to lack of working capital, antiquated equipment and high cost of production.

The bakery sector is currently dominated by three giants (Lobels, Bakers Inn and Proton) controlling 95% of the market while smaller bakeries cover the 5%.