Bakery sector needs $100m to recapitalise

Oliver Kazunga, Senior Business Reporter
THE Bakery industry needs between $50 million and $100 million to recapitalise and retool amid concerns by players in the sector over high lending rates on the market.

National Bakers Association of Zimbabwe (NBAZ) president Mr Givemore Mesoemvura said available credit lines were inaccessible due to high interest rates that do not allow the turnaround of bakeries.

“As a sector we need between $50 million and $100 million as working capital and for retooling. In the face of the prevailing market challenges, even if the credit lines are to be availed now, no significant impact will be registered as the loans are short-term in nature with lending rates considered too high,” he said.

Mr Mesoemvura said most of the loans available on the market have a 12 month-tenure with lending rates ranging between 12 percent and 18 percent per annum per annum.

As industry players, he said, they would want a scenario where financiers would lend at seven percent interest rate per annum with a five-year repayment period.

He said the above conditions would allow companies in the bakery industry an opportunity to retool and improve on their performance.

Since the liberalisation of the economy in February 2009, a tight liquidity situation as well as high interest rates among others have continued to weigh against economic recovery efforts.

Due to operational constrains facing the manufacturing sector, companies are struggling to improve capacity utilisation to competitive levels.

Of late, the operating capacity of the local bakery industry has fallen to 50 percent due to subdued demand for its products.

The subdued demand for products in the bakery sector is due to non-performance of the macro-economic environment, reduced disposal incomes and liquidity.

At present, the bakery industry employs 3 500 people and has indicated a knock-on effect on downstream value chain systems.

At its peak, the sector employed over 6 000 people and used more than 400 000 tonnes of wheat per annum.

@okazunga