150 bakeries close shop

Source: 150 bakeries close shop | The Herald August 11, 2017

Business Reporter
MORE than 150 of the 250 bakeries that used to operate have closed shop as operating conditions continue to be challenging.

Lack of working capital, high production costs and antiquated equipment is also making it increasingly difficult for the businesses.

Only 100 bakeries are still standing. The industry is controlled by three giants — Lobels, Bakers Inn and Proton — controlling 95 percent of the market, while smaller bakeries control the remainder.

National Bakers Association (NBAZ) president Mr Ngoni Mazango, who is also managing director for Bakers Inn, said although the trend is worrying, funding initiatives being proposed by Government to small companies might be helpful.

The industry, which has an installed capacity of 1,8 million loaves a day, he said, is operating between 50 to 55 percent.

“We have seen quite a number of our members folding due to antiquated equipment, lack of working capital, high wages and unsustainable water and electricity tariffs. About 150 companies have folded owing to challenges being faced in the industry and the most affected have been small bakeries in provincial towns and cities,” said Mr Mazango.

NBAZ engaged Probe Market Research to conduct an assessment of the industry between January and May this year. The survey was launched by Minister of Industry and Commerce Minister Dr Mike Bimha yesterday.

Presenting the findings, Dr Gift Mugano said small and medium-sized bakeries form part of the formal economy, producing a variety of bread designed to meet the needs of both low-income households and middle-income earners.

Small to medium bakeries’ greatest obstacles come from the outdated and aging equipment that they are using, the survey says.

“This means production techniques in a technologically evolving world are failing to cope. Evidence has shown that international with new technology bakeries produce bread faster and at large quantities,” the survey noted.

It is also believed that limited access to financial services is a major impediment. Small and medium-scale bakeries are mainly funded through borrowings from family and friends.

According to Dr Mugano, Government might consider tax incentives especially for banks willing to fund fledgling enterprises, including bakeries.

It was also observed that the under-performance of the economy, high cost of production, depressed demand, lack of working capital and competition are stifling growth for bakeries.

“Efforts to revive the baking industry should largely be focused on addressing these factors. These are macro-economic factors which require policy intervention,” added the survey.

Results also indicate that the baking industry is highly oligopolistic as it is controlled by a few industries. Estimates suggest that 95 percent of loaves of the bread in the market (produced by large bakeries) are competitively produced, while only a small amount produced by small and medium bakeries is uncompetitive.

“This again points out that large bakeries are to some extent directly responsible for closures of small bakeries,” explained the survey.