The Business Year

Peter Cottan

Managing Director, Superior Milling

David Bosse

Managing Director, National Milling Corp. Ltd

The country's millers have had some short-term disruptions relating to export restrictions, but on the whole strong demographics combined with strategic investments in diversification bode well for the industry.

What are your ambitions for developing your respective companies?

PETER COTTAN Superior Milling aims to be the number-one milling company, and we want to take advantage of the government’s new policy, supporting and developing value-added production, and diversify in line with this. We have plans to build a stock feed plant to supply small- and large-scale livestock farmers. By-products from maize can be utilized for the stock feed mill, making the whole operation efficient and environmentally sustainable. We will also build a wheat mill for similar reasons. We already sell flour to supermarkets, so it makes great business sense to replicate this model with wheat. Both of these mills will not be commissioned until 2018, because it takes 12 to 18 months to put up a mill; however, we already have the site earmarked for expansion at the Multi-Facility Economic Zone (MFEZ), and everything has been approved by Zambia Environmental Management Agency (ZEMA). The government will be our landlord, supplying the 4G-fiber optic, the raw water and sewage facilities, and electricity through a ZESCO 300MW substation, with a 100MW solar backup generator, funded by the World Bank. The other major benefit of us locating the mills at MFEZ is the tax-free concessions for five years under the program. Our new mills will be fully automated to improve capacity, speed, and efficiency. The costs of fuel and electricity are increasing to normal rates, so we look at all sorts of power-saving strategies and technologies and measures, right down to using LED lights and power factor ratios in the mills.

DAVID BOSSE Our three main products are maize meal, flour, and animal feed, which have remained solid staples of our portfolio, with change only coming by way of how these are packaged or sold. For mealie meal, we have tried different variations; however, people remain sold on the traditional kind. Rather than buying one 25kg bag for the month, people buy 5kg plastic bags once a week, presumably because of ease of accessing the product. Zambia’s flour market is typically a bakery flour market, and although we see more business with specialty flours and specialty breads, on the whole this is still an immature market, from which we expect substantial growth. Our feed sub-market has also been an area in which we seeing great growth. Although exports in eggs and chickens have dropped off, especially with DRC’s recession, one of Zambia’s largest trading partners, the five-year trend in the domestic market is for rapid growth. In 2016 we had a majority market share on feed and flour, and the biggest share in mealie meal, though since it is a highly fragmented market, this amounts to less than 5% of the total market.

What measures need to be taken by the government and private sector to boost agribusiness in Zambia?

PC Firstly, it is up to the government to create policies that are conducive to growing agribusiness. It needs to show that it supports value addition by limiting exports of raw materials and supporting the exports of value-added goods. We border eight countries, the majority of which import almost 100% of their goods; hence, there is a huge opportunity for Zambia to become an exporting nation. Furthermore, the suspension of maize exports needs to remain in place to boost reserves, although we expect the food balance sheet to show 1 million-ton surplus in 2017 owing to good weather conditions. Later, we could comfortably open up borders and reduce restrictions.

DB The number-one challenge is inconsistency in policy: it is difficult for anyone in the industry to make a five-year plan. We are relatively low on the value chain, as a basic processor; for us to add value it is a matter of having the right priced raw materials to sell our product anywhere in the region. If our wheat is the right price, we can send 100,000 tons a year of flour to the Congo. This year, for example, there has been a great deal of talk about maize that was exported to Malawi, but early on in the year, mealie meal exports were banned. Therefore, the 500,000 tons of maize that went to Malawi could have been 400,000 tons of mealie meal. Typically, we export continuously to Malawi, even when there is no shortage. In maize meal the country probably has 150% extra capacity per year, but the policy blocked the value-added product for export, instead allowing raw materials to go out. This had a negative impact on the country’s 40 mills and results in small short-term market growth. However, on the whole we are positive about the market: the population is growing, productivity is up, and with some policy consistency and a positive macroeconomic environment, businesses can thrive.



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