eBusiness Weekly
The world suffered a dramatic upheaval this year. Economies were uprooted. Informal businesses closed shop. Some will never open again.
Zimbabwe, which went through a tremulous 2019, was worse off.
Yet some local businesses are getting stronger. At least judging by their presence in the market. Some are even introducing new products. Some are planning to.
During an interview with a local radio station, Finance and Economic Development Minister Professor Mthuli Ncube boasted that shelves in local supermarkets are now dominated by local products.
To many, this seemed like the minister was stretching it. But a snap survey conducted by this publication showed the minister was not far from the truth.
Local products are indeed dominating grocery shelves. From rice to salt, cooking oil to breakfast cereals, detergents to cordials, dairy products to baked beans, local products dominate and they are cheaper — in most cases.
The packaging is competitive too. Proton with its cookies, Associated Foods Zimbabwe with its Mama’s cornflakes packaging, National Foods with its instant porridge packaging. They are all competitive.
Some of the manufacturers that have invested in local production are Mega Market headquartered in Mutare, whose product range cuts across segments. Mega Market has a number of leading brands such as Mega, Ideal, Top Chef, Ekono to name a few. Their products range from rice, salad cream, macaroni, spaghetti and many others.
Pushing beyond boundaries and dominating shelves is Associated Foods Zimbabwe with its Mama’s brand of products. From products such as peanut butter, mixed fruit jam, sweet orange marmalade, pure honey and roasted nuts, they have gone into production of breakfast cereals (Mama’s cornflakes) and pop snacks.
Another area that now has serious local competition is that of instant porridge. In one major retail outlet, we counted not less than eight different types from different local manufacturers. National Foods recently entered this space (instant porridge) and is flexing its muscles. Indeed, National Foods and Probrands are other brand names that dominate the grocery retail space.
While foreign products still dominate macaroni/pasta, margarine and salad cream products several local products are fighting for market share in those spaces.
The dairy category is another one dominated by local products. From milk to cheese, ice cream to yoghurts, there are more of local products than foreign.
Granted, we still import a whole lot more for our hardware stores, clothing, cosmetics, medical drugs, and so on, but at least for those that are basic, we should be able to produce them locally.
Raw materials the missing link
While the dominance of local products is really a feel-good story, it will even be better if the raw materials were local as well. The milk and related products category, for example, is dominated by local products, but the point of bother is that more than half of the raw milk is imported.
A category like flour while dominated by local products, there is value that is being left on the table as the bulk of raw materials are imported. At least in the case of flour something is being done to improve supply of local raw materials. Zimbabwe’s wheat farmers are on course to deliver 250 000 tonnes of wheat this season, with 190 000 tonnes already been delivered to the Grain Marketing Board (GMB) so far. The whole value chain will benefit from this. From suppliers of farming inputs, to farmers, to millers and to bakers.
National Foods among other millers are adequately providing mealie meal to the market, but we know maize is being imported. This speaks to opportunities for further growth and consolidation. The good thing is Government is working around the clock to make sure that come next year we are food self-sufficient.
However, while this year we have been blessed with good rains, we need to invest in water harvesting and irrigation for years when the skies run dry. The National Development Strategy speaks to this and we have seen dams being constructed while some are in the pipe line.
The demand factor
It is one thing to have food on our shelves and quite another to push sales. One economic observer pointed out that the reason why shelves are full is that consumers are constrained amid subdued disposable incomes.
With inflation having reached a high of 837 percent around June and still above 401 percent, consumer disposable incomes have severely been eroded. The exchange rate has added to the woes and some workers who used to earn above US$500 are now earning below US$200.
This leads to low disposable incomes and reduced aggregate demand. Results of a survey conducted by the Zimbabwe National Statistics Agency (Zimstat), to see the impact of Covid-19 on households, revealed that there was a considerable fall in household income since the onset of the pandemic up to July 24, 2020. According to the report, 90 percent of households who operated a non-farm business reported a drop in revenue, while 44 percent of wage workers reported a reduction or disappearance of wages. When household can’t meet immediate demand, then we can’t even talk of savings let alone investments. While Treasury has plans to spend 33 percent of budget on infrastructure the source of the funds is worrying.
Taxes are expected to be the major source of funding. Ideally, the source should be household savings and pensions. Government and infrastructure developers should be coming up with bankable projects that attract funds from savings and pensions. Not taxes.
All hope is not lost
The good thing, however, is that, we are now seeing not only signs of recovery, but even growth. Despite the Covid-19 induced challenges, businesses seem to be now selling more than they did last year. Comparing 2018 and now, sales volumes are lower. But if we are to compare 2019 and 2020, businesses have registered volumes growth. This points to recovery. Using listed companies as an indicator, sales volumes for 2020 are higher than those of 2019 across several sectors.
Afdis reported a volumes jump of 28 percent between first quarter to end of September 2020 against the comparable prior year. At Turnall the growth was 11 percent. At Delta, lager beer sales volume grew by 3 percent, sparkling beverages by 22 percent, with the only blemish coming from sorghum beer were volumes fell by 31 percent. At Lafarge and PPC the story was the same — volumes growth.
Next year can only be better
Good rains received this year have given economic players something to work with. If what was achieved with wheat production can be replicated in all summer crops, then our imports would be limited. If we produce enough maize, we can reduce our import bill by as much as US$300 million. This year Government launched a dozen policies across sectors. If half of those are religiously implemented, not many can bet against growth.
