Bakers, millers fight over govt decision on flourVICTORIA MTOMBA – Jul 29 2010 11:20
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Zimbabwe’s 2010/11 wheat production warning early
this month upset the local milling industry, but not
to the same degree as government, which passed a
decision to keep import duty on flour flat in its
budget review a fortnight ago.
Government is more comfortable with imports of wheat rather than flour to keep local millers in business.
Flour and flour products feature consistently among Zimbabwe’s list of sensitive products both in the Common market for East and Southern Africa and in the Southern African Development Community for that reason.
This has prolonged the fight between millers and bakers, with both parties wanting government to act decisively on the issue to nurse their recovery.
The grain millers’ association of Zimbabwe is pressing the government to reinstate duty on imported mealie-meal and wheat flour to 10-20%. But local bakers argue the proposal would stoke costs of production, resulting in an increase in bread prices.
The bakers’ industry sees itself importing more than 50% of its flour requirements until the next wheat harvest, a bill which could raise production costs, the price of bread and other flour products.
The Commercial Farmers’ Union predicts wheat output could slump to just over 11 000 tonnes in the next production season — the cereal’s all-time low — against national wheat demand of approximately 250 000 tonnes.
A budget review last week extended the suspension of import duty on flour until the next fiscal year.
“We are crying foul with this decision made by the Minister of Finance on the suspension of import duty, when the country has recorded a better yield since 2000,” Tafadzwa Musarara, grain millers’ association of Zimbabwe chairman, said.
“We don’t see any logic in the suspension of imports, this will have a negative impact on the next agricultural season.”
Musarara said cheaper South African products produced on economies of scale and shipped in large quantities, were dominating the local retail market, stifling the recovery of the local industry.
About 40% of the players in the sector could suspend operations by year-end due to viability problems, further bringing industry-wide capacity utilisation down from the current 7%.
But bakers, estimated to be operating below 30% of installed capacity, see this accelerating their demise.
“We don’t want flour to have any restrictions. The Ministry of Industry and International Trade can introduce a 5% import duty on flour not the 25%,” Cydwell Chitehwe, a representative of the National Bakers’ Association, said.
“At the moment local millers are not competitive they have low production capacity and also the cost of production is high. The 5% import duty will allow the players to be at par with other players, “said Chitehwe.
Lobels Bread chief executive officer Burumbo Mudumo said the company uses local and imported flour on 50/50 basis.
“To lobby for duty protection will promote inefficiency. We expect our millers to produce flour and be able to export to South Africa, Mozambique and Europe.
“We have never produced enough wheat, our agricultural system has not managed to produced 20% of our requirements,” said Mudumo.
“Imported flour is of good quality compared to local flour, which does not compete well on the market. Imported flour produces good quality bread compared to local flour, and the price is affordable to consumers,” said Mudumo.
Mudumo said if import duty is imposed the price of bread will go up and consumers will have to pay the penalty.
He said the lobby is a sign of production inefficiency as the country will not be able to compete with its poor quality flour.
Lobels Bread requires 110 tonnes of flour per day to produce bread for the whole country.
Lobels Bread and Bakers’ Inn are currently operating at full capacity.
The country’s current national daily bread requirement is at one million against a demand of 14 million.
Zimbabwe has failed to increase wheat production in the past decade since 2000 when 250 000 tonnes were produced.