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Dickson Mangena, Business Reporter
STIFF competition in the baking industry is threatening the continued existence of small to medium players.
National Bakers’ Association of Zimbabwe president Mr Givemore Mesoemvura said small to medium bakeries were struggling to cope with competition being exerted by bigger and established bakeries that have the capacity to sell their products at lower prices relying on pushing huge volumes on the market to maintain operational costs while attaining reasonable profit margins.
He said through utilising economies of scale the country’s bigger bakeries have managed to drive small to medium competitors out of the market while creating barriers to entry for new competitors.
“The operating environment is worse off especially for the small to medium operators. Competition has intensified as can be seen through promotions and advertising which has taken root in the industry. Small bakeries are now suffering because of economies of scale and large volumes which bigger bakeries possess,” said Mr Mesoemvura.
Earlier this year about 20 small to medium scale bakeries around the country were reported to have closed owing to a decreased demand in bread.
Mr Mesoemvura said the prevailing cash crunch in the country and the increase in the price of flour had negatively impacted on the viability and profitability of the baking industry. In the last quarter of the year milling companies increased the price of flour from $27 to $32 per 50 kilogramme.
Presenting the 2017 National Budget on Thursday, Finance and Economic Development Minister Patrick Chinamasa said despite support measures availed by the Government to the milling industry, the number of producers continues to shrink, from 368 in 2007 to 37 in 2016 due to competition from wheat flour imported from the region under bilateral trade arrangements.
“Notwithstanding threats to the viability of the milling industry, the industry continues to receive new investment. Blue Ribbon Foods has been revived by a new investor, which has increased the level of capacity utilisation and competition, resulting in prices of flour declining from $32 to $27 per 50 kg.
“Such investments need to be nurtured, in order to enhance value addition and linkages with the agro-processing and packaging industry. It is, thus, proposed to amend bilateral rules of origin on flour, to the effect that the preferential treatment is granted to flour milled from wheat grown in the country of export,” said Minister Chinamasa.
Minister Chinamasa said it has been proposed that wheat flour be removed from the Open General Import Licence as from 1 January 2017.
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