New NBA boss has a mountain to climb

Incoming executive draws up strategic plan for industry

Kudzai Bare, Staff Reporter

CYDWELL Chitewe, the new National Bakers Association (NBA) president, says the market may have started enjoying increased bread supplies since price liberalisation in February last year, but most bakeries are still battling to stay afloat.

Unbearable cost structures, which are a result of high interest rates of up to 30 percent, high utility costs and other overheads that have been brought forward from the recession era have meant that capacity utilisation in most bakeries has remained significantly low at 25 percent.
This is at a time when most bakers are in desperate need of new equipment to replace ageing ovens and delivery trucks that are causing costly breakdown sector-wide.
The market, which has witnessed a number of new entrants over the years, is also sensitive to both price and quality and the challenge for the industry is to strike a healthy balance between the two, which is not easy.
Price sensitive in the sense that consumers are not liquid enough to afford a cost recovery price due to poor salaries which are way below what is obtaining in the rest of the southern African region. And quality sensitive as bread has to conform to the strictest health standards, which means that industry players cannot afford to cut corners as is the case in other non-food sub-sectors of the economy.
All this tends to put a lot of pressure on bakers whose operations were weighed down by price controls prior to the de-regulation of the domestic market in February last year.
Chitewe, the Lobels’ Bread operations director, took over the NBA chairmanship last month, replacing Bramwell Bushu of Superbake, a subsidiary of Harambe Holdings.
He will be deputised by Owen Murumbi of Bakers Inn and Thenjiwe Makomva of Auflan Bakery.
The incoming NBA boss comes at a time when bakers are recovering from the effects of a decade-long economic crisis, which was characterised by shortages of all raw materials, uneconomic pricing and the general economic shrinkage that made it impossible to maintain or replace machinery.
A Confederation of Zimbabwe Industries (CZI) survey noted as much in its edition last year that the economic recession had put an enormous burden on companies by limiting their ability to replace ageing equipment.
NBA is an affiliate of the CZI.
But the greatest challenge that bakers faced, especially as the economic crisis worsened in 2007 and 2008, was a freeze on prices of consumer goods by the National Incomes and Pricing Commission (NIPC).
The NIPC led a damaging crackdown on price increases that resulted in the arrest of several top executives in the industry, allegedly for resisting the policy.
“Due to funding structures that were available from last year, especially where the interest rates were not only high, but money available was for short periods of up to 90 days, profitability has evaded most bakeries,” Chitewe said.
“Bakers that have managed to deal with the high cost structures are beginning to make profits now although capacity utilisation is still the challenge. The good news is that bread is widely available in most parts of the country for our consumers unlike previously when bread queues were the order of the day,” the NBA chief said.
The NBA estimates that the sector is operating at 25 percent of capacity, making it one of the few industries that have taken long to respond to new government interventions.
Capacity utilisation in some sectors of the economy has increased to about 40 percent, according to recent government estimates.
Chitewe said the industry, which produced over 1,4 million loaves of bread per day before the economic downturn, is now producing approximately 800 000 loaves per day.
Inadequate wheat production, erratic electricity supplies and water shortages are also affecting the industry.
The baking industry greatly depends on the production and supply of wheat but output has declined from over 800 000 tonnes before the economic crisis to less than 400 000 per annum.
Because of the bottlenecks in the supply of local wheat and its domino effect on millers, most bakers are now being forced to import the raw material at a premium.
The new NBA executive, however, says it has already come up with a strategic plan to serve the mutual interests of members and assured customers of excellent bakery standards as in most countries.