admin
2019 was quite a challenging year for many companies, and Davipel Trading, manufactures of Jumbo cornsnacks, Sunny super refined mealie meal and Agri milling stockfeeds among other products, was no exception. Our Business reporter Michael Tome (MT) met with Davipel Trading managing director Davison Norupiri (DN)and discussed a wide range of issues. Below is an excerpt of the conversation.
MT: How was the 2019 business environment?
DN: If we are to look at year 2019, we have been on the right path as Zimbabwe and those leading the economy were actually in the right path as well.
We were just a little bit derailed when we suddenly saw that there was an imminent drought, which is where we are now, as you all know that the moment drought is pronounced, what it then means is Government will not pump anything less than US$600 million in the importation of maize.
So looking at that only, you will be looking at some of the resources which were to be used on other economic issues.
So really moving something in abundance of US$600 million is not a joke if you are running a small economy like Zimbabwe.
So basically that really affected us, if you look at last year, the beginning of last year, companies were performing well as far as capacity is concerned, our capacities were more like 50 to 65 percent and for the food industry we were more than 70 percent.
MT: Foreign currency has been a sticking issue for many enterprises, how have you dealt with this challenge as a company?
DN: Foreign currency is a sticking issue and it is something which is still giving business a lot of challenges, so in terms of strategy, we have come up with three major issues which we are focusing on in order to try and manage our foreign currency requirements and spending.
We are doing import substitution in a very big way, if you look at our plant, we used to import maize grits into this country worth about US$500 000 every month and now we have since reduced that to zero, the reason being we decided to actually add value in our agro products mainly our maize, instead of importing grits on some of the products we decided to invest in a plant to manufacture them.
That is when we now came up with our Agri-Milling plant, by so doing we are milling maize meal and maize grits and as a result we have brought down to zero our import bill which was going over US$500 000 a month.
So that only, had a very huge impact in terms of our forex requirements.
The other thing we are also looking at is export promotion, we are now starting to export most of our products, we have actually come up with an export department to make sure that we have a robust team on the ground doing research in other countries and get business from those countries as well.
So we have now started exports which we have not been doing and the fact that we are a company in a special economic zone, it gives us leverage as far as our exports are concerned.
So by the end of this year we are expecting to export above 40 percent of what we are currently producing.
We are also on the interbank market as far as foreign currency issues are concerned.
MT: And the electricity situation, how has it impacted on operations?
DN: Electricity has been giving us a torrid time especially the last quarter of 2019, we actually had to cut a shift because we were losing an average of eleven hours a day.
We run a 24-hour operation and we were now losing 24 hours a day so we had to cut a shift, because we were just paying people for not working, which basically came as a cost and as a result of that we also reduced our output and capacity utilisation went down because of electricity.
Of late as of the beginning of this year, there has been major improvement as far as shedding (electricity) is concerned. I think they are also considering that industry has to work during the course of the day and also in another way, quite a number of companies have downscaled their production so as result, I believe that demand for electricity has gone down.
MT: You have mentioned that your company is in the Sunway City special economic zone, what are some of the benefits of operating in this zone.
DN: We don’t need any license in importing or exporting any product if you are in Special Economic Zone it actually takes away the barriers we used to have because there are so many licenses required if you want to import or export certain products.
So the fact that you are no longer applying to get that particular license, it’s a very huge benefit because we will be simply producing and exporting unless if there are some other new licenses like vet licenses those we cannot do anything.
The other thing is if you are in SEZ you don’t pay duty on the importation of all your raw materials and capital goods.
The other thing is you do not pay corporate tax, if you are licensed to be in Special Economic Zone for five years.
The Government has come up with such benefits so that people are attracted to invest in Special Economic Zones and have appetite to export some of their products.
MT: Your Company has this division which deals with mealie meal and some other grains, how are you dealing with procurement of maize and other related raw materials.
DN: We are a member of Grain Miller Association of Zimbabwe (GMAZ) and
GMAZ have already started importing maize and Government has liberalised that as well, we can now import our maize directly.
MT: There is case of imports flooding the local market, particularly those within the range of what you manufacture. How are you dealing with that kind of competition?
DN: At the moment we are lobbying with Government to make sure that Statutory Instruments which were raised as far as importation of certain commodities is enforced and make the local industry survives.
We are working on being competitive, if the goods are coming into the country through proper channel, we do not have much of a problem.
Our challenges come in competing here and there but we don’t have much of it simply because they will be paying required duties and taxes.
As it is, should they land, we also have to compete and run at the same level which is what is actually happening now.
Currently, some of the goods which were being imported into the country are no longer coming as local retailers and wholesalers are now weighing the options of buying the products from us than import.
The major issue which bars them is the issue of forex. They will have no choice and we are actually enjoying that, but during the process we are also trying to make sure that we are also competitive as far as our products are concerned.
MT: Some say opportunities are created in tough times, what are some of the opportunities you are seeing in such an economic environment like Zimbabwe’s?
DN: We have actually come up with a product out of innovation, we have got traditional beer which competes equally well in terms of quality with some renowned brands.
And it is almost close to ten times cheaper. What this basically means is we are taking advantage of opportunities that you are talking about, on traditional or opaque beer front.
We are also manufacturing ginger beer which in this case is the clear beer. That beer is prepared and is ready to be taken after 48 hours — that’s what we have actually come up with.
We have noted that people want to enjoy themselves and drink a lot but simply because of the price they are failing to do that.
MT: In your opinion how accessible is finance and how viable is the cost of funding in Zimbabwe.
DN: Finance is actually available with quite a number of banks just looking for safe hands to lend the money, they are running a lot of books that are not performing well.
Their hands and fingers have been burnt before so they are making sure that they wont to burn again.
The finances are there and the cost of finance is fairly reasonable, not very good not very expensive but fairly reasonable considering the prevailing inflationary environment.
MT: What do you think Government or policy makers should do to make the business operating environment easier in 2020 going forward.
DN: I think we need to reduce the rate of producing Statutory Instruments, because in producing an SI at times some other Government Departments may not know that they are closing someone else’s business overnight.
In producing SI’s some other Government Departments may not know that this scares investors. The moment you want to invest into a country and you do not know the law that is coming after two days, you tend to tread cautiously.
I think, yes, as much as we want to monitor and regulate and probably look with a very close eye at activities that might be happening, I think the rate of producing business related SI’s has to slow down that is if they cannot stop completely.
As it is right now, businesses are trying to tweak to make sure that they survive under this environment, so if you tweak and meet and opposing SI along the way it means you have hit a brick wall and it becomes so challenging and very difficult.
For instance, we have the issue of banning plastics that once happened.
The moment we ban plastics just like that, remember you are closing lots of companies and at the same time a lot of people will go into the streets so it is something we really need to look at.
MT: As a company what is your outlook for the year 2020?
DN: We are seeing a potentially challenging year in 2020, it has been a good year so far but the fact that there is a drought now, it means we have to come up with new strategies.
Online Reporter