via GMB seeks $50m to recapitalise | The Herald August 31, 2015
The Grain Marketing Board is seeking $50 million to recapitalise its operations. Of the funds, $31 million will go towards the rehabilitation of its silos, $10 million on the recapitalisation of the commercial unit and $8 million for upgrading information communications technology systems to improve data capturing, acting general manager Mr Lawrence Jasi told shareholders at the company’s annual general meeting on Friday.
GMB, wholly owned by the Government, has 12 silo plants across the country with a holding capacity of 750 000 tonnes. Mr Jasi told the shareholders that the company would soon float a tender to invite interested bidders to undertake and fund the rehabilitation of the dilapidated grain silos. GMB chairman Mr Charles Chikaura told the same meeting the rehabilitation of the silos was “urgent”.
“The silos have not been rehabilitated (for long) and urgently require attention to prevent grain quality deterioration when stocks increase during bumper harvest years,” he said. About 70 percent of GMB’s income comes from grain handling and storage fees. The company also has 84 depots with storage capacity of about 4,5 million metric tonnes.
While the company is still looking for funds to undertake a comprehensive rehabilitation exercise, it is using “little internal resources to do maintenance works at some of the silos,” said Mr Chikaura. Some major works have already been done at the Norton silos.
Mr Jasi said the company has applied for $8 million from Treasury to upgrade its ICT system. Earlier, finance and administration manager Mr Muzurura said lack of connectivity and accounting function at some depots results in the failure to timely obtain records. The company is targeting 80 percent connectivity by end of the year.
“Connectivity has been the biggest let down to our operations of late and we are putting in place initiatives to make sure that all our operations are connected,” said Mr Jasi. He said the ongoing restructuring would result in the company introducing accounting functions at depot level.
On the commercial business, GMB started producing food commodities and has set up a stockfeed manufacturing plant to increase its revenue streams. To achieve its goals of commercialisation, the board was split into two units — the Strategic Grain Reserve Unit and Commercial Unit for Non-core Operations, Mr Jasi said.
He said the company was expecting growth in market share and revenue now that the stockfeed plant has come into line. The Norton stockfeed plant has monthly capacity of 10 000 tonnes.
Mr Chikaura said the company’s commercial business is viable and requires capital injection to reach expected potential. “We will consider joint ventures in this line of business and to date we have received inquiries on the business from regional investors who have identified potential in the business. Capitalisation of the commercial business has not been achieved yet, but we are optimistic that we can achieve (it) this year.”
Mr Jasi said GMB would use savings from staff rationalisation to capitalise commercial units. After the staff rationalisation, the company managed to reduce its monthly wage bill from $2,1 million to $680 000. Prior to the exercise, the wage accounted for about 80 percent of the company’s total costs and its now around 32 percent.
In 2014, GMB recorded a loss of $51 million, from a profit of $910 000 a year earlier largely due to low handling and storage fees, high staff costs and high fixed costs resulting from wide depot network. Revenue declined to $38 million from $80 million. This will not, however, threaten the going concern of the business as the company received $34 million from the Government which was used to pay the creditors.