Tanzania firm promises to shake up milling industry

[Geza Ulole]

The entry of a Tanzania-based miller into the local flour production industry is causing jitters among established milling companies and some cereal farmers.

There are fears that the milling company, which will operate under the umbrella of the giant Bakhresa Group of Companies, may deny farmers a market for their produce should it opt to procure maize and wheat from across the border.

The chairman of Rift Valley Farmers Stakeholders Forum Justus Monda told the Sunday Nation that although he supported additional investment in the country, he was wary because millers had a habit of exploiting farmers.

He expressed fears that a company with deep roots in the region would have an unfair advantage over local companies by cheaply sourcing raw materials from across the borders.

"We read mischief in plans by this firm with a strong establishment in other countries to put up a milling plant in the country. They must assure us they will first exhaust the maize and wheat we produce before looking beyond the borders," he said.

The Bakhresa Group of Companies has a presence in Tanzania, Zanzibar, Uganda, Rwanda, Burundi, Zambia, Malawi, Seychelles and Mozambique. Construction of a milling plant in Mariakani, Mombasa, is underway. Once completed, the plant will process 860 metric tonnes of cereals a day at full capacity. The cost of putting up the plant is estimated at $50 million (Sh4.2 billion).

Ms Virginia Nthenya, an employee at one of the smaller milling plants, said she was afraid the giant miller would stifle the growth of local flour millers.
"Many jobs will be lost if proper policies are not put in place to protect small-scale millers from being suffocated by the big players in the cereals industry. There is a need to ensure the entry of foreign companies does not spell doom for local companies."

But Bakhresa Group of Companies Executive Director Abubakar Said Bakhresa said they would give local produce priority and only import cereals as a last resort to bridge any deficits in accordance with government trade regulations.

Competition

He observed that Kenya is well endowed with vast business opportunities that have remained untapped by local entrepreneurs due to inadequate capital.
"We need competition. It leads to high quality products at lower prices compared to when dealing with a monopoly," Mr Bakhresa said.

He said the company had so far created 300 jobs in Kenya as they pursue their expansion plans, adding that they would help the government break up the cartels that have done little to bring down the cost of living.

"Many millers in Kenya work and act on a take-it-or-leave-it attitude and at times provide sub-standard products to customers. We want to improve standards," he said.

Also quick to allay farmers' fears was Agriculture Secretary, Mr Felix Kosgey, who said there were enormous investment opportunities in the agriculture sector that if well utilised would boost national efforts to fight hunger and ensure food security. He assured potential investors that the government would provide an enabling environment for business.

"I am not aware of that particular company's plans to start a milling plant in the country, but farmers should not be worried. The government cannot allow them to be exploited," said Mr Kosgey.

The Cabinet Secretary said investors who are allowed access to the Kenyan market must operate within the laws governing cross-border investment. Of critical importance, the minister said, investors must source all available raw materials locally before looking for alternatives outside the country.

"Importation of goods is guided by the law and such legislation is made with the interest of Kenyans at heart," he said.

Mr Anthony Kioko from the Cereal Growers Association also welcomed the development saying that the miller would provide a potential market for their production.

"Millers who are already operating say their machines are not fully utilised, but if this investor has done a feasibility study and proved otherwise, so be it," said Mr Kioko.

Mr Monda said cross-border trade and regional integration should not be used to frustrate farmers and drive local industries from business because this would lead to job losses.

He suggested that the government should ensure millers enter into binding contracts with farmers about the quantity, quality and prices they would offer for their cereals.

This, he said, would address instances where the millers wait for the National Cereals and Produce Board to run short of funds so that they can dictate prices or venture into external markets.

There are more than 100 millers in Kenya, some operating below capacity. The main millers are Mombasa Millers, Unga Limited, Pembe Group and Premier Group.

Some county governments like Uasin Gishu and Trans Nzoia Counties, the country's grain basket, are planning to put up their own milling plants as they diversify into value addition.

http://www.nation.co.ke/business/Ta...228/-/view/printVersion/-/ryra8w/-/index.html

Blue Ribbon has concluded negotiations with Tanzanian grain miller Bakhresa Group in a deal that could result in the injection of $40 million in fresh capital. Sources privy to developments said negotiations with Bakhresa have been concluded with only a couple of regulatory approvals the only outstanding issues to the deal. "The deal has been finalised and is waiting a couple of regulatory approvals from the authorities," the source said.

Since Blue Ribbon is not a listed entity, the outstanding approvals could be issues relating to indigenisation laws and the Competition and Tariff Commission.
In terms of the country's equity laws, foreign investors can only hold a maximum of 49 percent while locals should take the balance unless the responsible minister has given a special exception to a deal.

The source would, however, not discuss the intimate details to the deal saying it had reached a sensitive stage that could jeopardise efforts to revive the company.
Grant Thornton Camelsa's Reggie Saruchera, who was appointed by the High Court as judicial manager of Blue Ribbon in 2012 could neither confirm nor deny that the deal has been finalised, only saying that "the deal is on track" and would be concluded soon.

This comes as the company is expected to resume operations in the next two months ahead of the injection of fresh capital by giant Tanzanian miller, Barkhresa.
"We decided to resume operations and bring back the popular brands this company produces while issues of fresh capital are being finalised," the source said.
Blue Ribbon, manufacturer of popular brands Ngwerewere and Chibataura, has reportedly agreed terms with a supplier, which enables it to resume operations.

According to Mr Saruchera the company requires $30 million to $40 million, with $15 million going to working capital and the balance to other obligations.
The company is buckling under heavy liabilities and shortage of funding to support operations, which saw the company putting workers on shifts to manage costs.

The Bakhresa Group will have to deal with the $30 million liability saddling the company apart from injecting fresh funding for recapitalisation and working capital.
Blue Ribbon was operating in fits and starts until the High Court placed it under judicial management two years back when output capacity fell to unsustainable levels.

It is not clear what stake Bakhresa would take, but sources said the stake would be determined by the amount of capital the group will invest in Blue Ribbon.
Blue Ribbon faces a crippling shortage of funding characterising local industry, which forced the company to borrow at punitive interest rates.

It has also been battling to repay a $2 million loan facility that was extended by PTA Bank.
Once one of the country's largest millers, Blue Ribbon has five main divisions namely BRI logistics, Blue Ribbon Foods, JA Mitchells and Nutresco Foods.

http://www.bizday.co.zw/2014/05/19/blue-ribbon-seals-fresh-capital-deal/

 

[Geza Ulole]

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