FOOD and beverages processor Nestlé Zimbabwe last week commissioned a US$2,5 million cereals manufacturing line in Harare, taking its total investment to over US$40 million in the past decade. The new line will increase output by 30%. Business Reporter Melody Chikono (MC) spoke to chairperson and managing director for Nestle Southern Africa, Bruno Olierhoek (BO) who said Nestle was in Zimbabwe to stay. Below are excerpts of the interview:
MC: How will the new roller dryer you commissioned today contribute to value addition?
BO: These rolling lines have a certain capacity and because we already had two, we are adding up number three which is increasing capacity. But we feel that with the current momentum we will soon reach full capacity. So we are already starting to think beyond that for a fourth roller dryer which will then add 25 to 30% capacity.
MC: Most businesses suffered a decline in volume revenues due to the Covid-19 pandemic. What has been the situation for Nestle?
BO: For Nestle it was actually not the Covid-19 period. It was before the Covid-19 period. We had a business model which needed a lot of forex to be able to operate and we know that in Zimbabwe we had difficulties getting foreign currency. That is why we decided in 2018 and 2019 to change that business model and to be less forex dependent.
We used to be over 80% dependent on forex but by changing the model we are now less than 20% dependent. Therefore it allows us, despite Covid-19, to really operate and grow. The year 2020 has actually been a year we have been able to grow. It has been a very good year and also not just because of the increase in production but also by route to market. That is where I was saying we had been increasing the number of distributors so we now have 11 distributions and we are also having the programme that we have with young women who are going into the neighbourhood to sell our products. So those young women who are unemployed get nutrition training and selling skills and they get to have their own livelihoods. There are now about 135 women that have this livelihood. As a result, we want to copy and paste this model across Zimbabwe so that we have more people who are able to have good livelihoods as well as selling the products to consumers.
MC: There is now the forex auction system, have you benefited from that?
BO: Yes we do use it and leverage on it. As I said we still have 20% forex need, and this is for importing highly specialised products like infant nutrition. So we still need access to forex. We also generate our own forex through exports but this new mechanism on the market is really helping us. In terms of exports, we are exporting to Mozambique, Malawi, Zambia and also South Africa. We are hoping to triple the exports and next year we are hoping to export US$10 million worth of products.
MC: Then there is the Victoria Falls Exchange. Have you made plans to list so that you also have access to forex?
BO: Like I said what Nestle is doing is to align our business model to the realities and of course we will continue to observe the developments and adapt and see what the best way forward is. Of course this is not something that is cast in stone, so we are looking to see how we can thrive in the county.
MC: What is your comment in relation to the currency changes and how have you been able to adapt?
BO: It has been tough for everyone but we have been able to adapt and change our business model and therefore we continue to thrive. That confidence is what allowed us to push the button and increase the capacity and like I said, we even have plans for further increases into the future.
When we look over the last couple of years we see also on the side of stabilisation many positive indicators. So Zimbabwe is a country with potential that is why we are here and continuing to work hard with everyone.
MC: Talking about capacity utilisation, what is your overall capacity utilisation at the moment?
BO: So we have different products and the machines are used for these different products at different rates so I cannot say this number. It depends also on our mix. But on the cereal side we were close to full capacity that is why we had to invest in the this roller dryer to increase that capacity and on the dairy side we are the only company that has a spray drying capacity and that has a very big installed drying capacity and there we still have a lot of room to do much more. That is why we are investing in new products. We will be launching a new product -- The Nestle Cremora produced in Zimbabwe with Zimbabwean milk included in it. That is why we hope that next year we will be able to continue to sell a lot and again improve capacity for the future.
MC: Talking about investments, how have you managed to deal with the issue of antiquated machinery which is bedevilling other companies in Zimbabwe. How much have you invested in that?
BO: I want to first of all make it clear that the quality standard on Nestle is the same all over the world. It does not matter where we are. What you have seen in our factory in Harare are the same standards in Europe, in America, in Asia, wherever we are. Therefore we have to continually upgrade to maintain the standards and that is why over the last 10 years we have invested over US$40 million dollars and this year again we have the investments of the third roller dryer and other investments.
We also expect in the future to continue to invest in upgrading capacity and upgrading standards. It is a continuous process. We have at no point dropped the quality of our standard.
MC: If you compared Zimbabwe with other countries in which you have operations. What can you say about this market?
BO: Zimbabwe has been challenging in terms of foreign currency, inflation and so on, but this is something we believe Zimbabwe can overcome. That is why we want to stay in the present today and thrive tomorrow. That is also why we have been changing our business model to be able to operate despite the difficulties the country has been going through and I am happy that the team has continued to work hard and has made this transition successful and allowed us to continue to look at Zimbabwe with hope and continue to invest.