Bakers eat the bread of sorrows
Mbongeni Mguni | Friday July 6, 2018 13:26
Not too long ago, the small-time bakery was a convenient communal meeting point of sorts, children darting in and out of the doors on errands, adults queuing up early for the freshest loaves and confectionary items, as the syrupy aroma of baked goods filled the air and wafting out to entice other customers on the streets.
Villages around the country took pride in their bakers, who employed their young school-leavers, and even in major urban areas, discerning consumers knew exactly what time the freshest bread would be on the shelf every morning and evening.
Today, the rise and spread of supermarket giants, out of the cities, through the towns and into the villages, has meant the integration of retail activities. Where a village’s shopping centre boasted an independent bakery, butchery and grocer’s all proudly owned by citizens, a retail chain would march in, put up a single store and have the in-store bakery, butchery and grocery under one roof.
The major retail chains such as Choppies, Spar, Payless, Sefalana, Saverite have divvied up the country’s cities, towns and villages, even going head to head neighbourhood by neighbourhood, squeezing out independent bakers, with their lower prices and other competitive advantages.
Today, the Botswana Millers Association estimates that at least 96% of the country’s bakeries are located in-store, a fact anyone can easily verify by driving around Gaborone and looking for a standalone bakery.
“What’s killing us as small businesses is that we don’t have the financial muscle to take on their economies of scale,” explains Prestige Bakery managing director, Reuben Keddy.
“For the supermarkets, bread is just a crowdpuller, but for us we are undiversified businesses. That is what is killing us.
“The supermarkets pull down the prices of their bread and make up the difference on other items. They operate as chains and can approach suppliers to secure major discounts, for instance, for flour.”
A snap survey by Mmegi around Gaborone this week found that the price of a no-label loaf of white bread ranges from P4.95 in Spar, to P5.45 in Choppies and P6.45 in Pick n Pay. Meanwhile, Capri, one of the last standing independent bakeries, sells the same loaf for P6.65.
Independent bakeries also say the bylaws are skewed against them in their fight against the in-store bakeries. In most areas, licensing authorities demarcate standalone bakeries as light industry meaning they can only set up in those areas. The rules are different, however, for the in-store bakeries, whose “parent” shops are demarcated as commercial and located as such, in prime, high human traffic areas. “Who leaves the malls and goes to the industrial area to buy in the bakery.
“Why don’t these in-store bakeries face the same conditions as us? The areas we are allowed to operate in are demarcated as industrial and a totally isolated from the movement of people.
“Why are the in-store being given licences for commercial areas,” Keddy asks.
Curiously, as the squeeze has been put to independent bakers, they have turned their guns, not on the supermarkets, but the millers who supply them with their major input, wheat flour.
Local millers and bakers have waged an eight-year war over the 15% levy charged on wheat flour imports, an initiative introduced by government in 2003 to shield the then infant local milling industry from predatory pricing and dumping by the larger, dominant South African industry.
Over the years, three major wheat millers, Bolux, Bokomo and Ultimex have strengthened their operations, and are able to completely satisfy the national demand of 120,000 tonnes of wheat flour per annum.
This capacity is dwarfed by South Africa’s output of three million tonnes of wheat flour per annum, with producers in that country eyeing Botswana as a lucrative export destination.
Bakers successfully lobbied government against the wheat levy, saying the millers had created price monopolies that were further straining their viability. Bakers also accused the millers of abusing their protected position to dictate “cruel” credit terms and conditions. Once a baker fell foul of one miller in terms of credit, they would only have two more to move to before having to consider South African imports, made more expensive by the wheat levy.
Millers argued that they were boosting the country’s industrial capacity, protecting 2,000 jobs, had millions of pula in investment in jeopardy and in any case, South African exports were flowing into Botswana regardless of the levy.
Under pressure from the bakers, government in 2015 began cutting the levy by one and a half percent per year, and recently new Trade Minister, Bogolo Kenewendo, slashed it to nine percent.
“Investor confidence in the Botswana milling industry is at its lowest in the history of the sector and shareholders are hesitant to make further investments in the Botswana economy,” says Nkosi Mwaba, chairperson of the Botswana Millers Association.
“In fact, some members are exploring other markets and adjusting their business models away from manufacturing. “At this rate, the milling industry will collapse.” The Association’s position is that government must make its decision in the best interest of industry and protecting jobs “not just to appease disgruntled parties due to their persistence”.
“We should be focussing on growth, export development, value addition and creation of more jobs and opportunities for Batswana. Instead, millers are struggling to survive in this economy,” Mwaba says.
For Keddy, bakers are barking up the wrong tree by singling out the wheat levy as the source of their troubles. He says further reductions of the levy will only help the retail giants source cheaper flour for their in-store operations.
“People in the Bakers Association are pushing their own interests. Those who are still fighting against that levy are near the South African border and expect to benefit from importing cheaper.
“Someone based in Dukwi can’t benefit from that because the costs of bringing that flour all the way would cancel the benefit,” the veteran baker says.
The fact that formerly prominent members of the Bakers Association could not be located for their side of the story, points to the hole independent bakers are in. The Association appears to have crumbled or at the very least, significantly lost momentum.
Many of those still standing are reliant on government tenders for the provision of bread in schools, seasonal contracts which are fiercely fought over frequently resulting in court cases.
“The Association went to the PPADB and convinced it that these tenders must not be given to one company only, but rather groups of up to three,” Keddy says.
“You cannot grow by getting a third of a small contract. It may keep you going, but you won’t grow.”
For the surviving independent bakers, keeping going is all they are focussed on for now.