Foreign payment delays hit bakers

HARARE – Local banks are struggling to process about $16 million worth of foreign payments for local bakers, a situation that has affected local production, the National Bakers Association of Zimbabwe (NBAZ) has said.

The association’s chairperson  Ngoni Mazango last week said while the sector was continuously engaging banks over the matter, production at local bakeries was starting to feel the pinch.

“Production is being hampered by the outstanding $16 million in foreign payments for the acquisition of raw materials.

“Suppliers will not deliver if payments have not gone though in most instances. The effect here is production is affected because it means raw materials take longer to get to their intended destinations,” Mazango said.

At the moment, local manufacturers are failing to secure key raw materials from foreign countries as the country’s banks have low nostro account balances.

A nostro account is a bank account held in a foreign country by a domestic bank mainly to facilitate settlement of exchange and trade transactions.

Thus, when bakers make orders, their respective banks then have to pay the suppliers through the nostro account.

Mazango, who is also Baker’s Inn managing director, said with an installed capacity of 1,8 million loaves a day — and operating between 50 to 55 percent — the sector has been producing less and less on the back of foreign payment delays.

“Naturally, output figures will also go down if the bakery is not getting certain raw materials on time,” he said.

Payments to raw material suppliers are presently not being processed fast enough, a situation that had led to delays in delivery of crucial raw materials to manufacturers affecting production and in some cases leading to slumps in output.

In the wake of cash shortages, banks have been unable to meet local as well as foreign account demand, which has been worsened by the country’s import restrictions putting more pressure on local manufacturers as demand rises.

Due to liquidity challenges, the Reserve Bank of Zimbabwe last year came up with a payment priority list, ranking essential imports like fuel above raw materials for local manufacturers.

With more than 150 of the 250 bakeries that used to operate having closed shop as the operating environment continues crowding out smaller players, Mazango said NBAZ’s main focus was to ensure that the few remaining players remained in business.

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, Baker’s Inn and Proton controlling 95 percent of the market, while smaller bakeries control the remainder.