Lobels shuts down bread plant

HARARE – One of Zimbabwe’s top and oldest bread producer, Lobels, has temporarily suspended operations at its Harare plant in a development that reflects the worsening macro-economic environment.

Although no official statement has been released by the company as yet, sources at the company said the Harare plant was shutdown on Tuesday while the Bulawayo plant is expected to be closed in the coming few days.

The sources mentioned the challenges in availability of electricity as having a significant influence on the decision. They said the unavailability of electricity meant the company had to seek alternative sources of power and this naturally meant diesel.

Diesel supply together with Petrol, has on the other hand been below market demand leading to shortfalls and costly market gaps in production. A look at the trade data shows that government has significantly trimmed the importation of fuel as forex challenges bedevil the economy.

On Monday the price of fuel was raised by close to 6% making its use more expensive, but without alternatives.

Government has however said the erratic power supply has been caused by low dam levels at Kariba, where over 50% of the country’s power is generated.

The sources also mentioned the low availability of raw materials particularly flour. Wheat supplies, half of which are sourced from outside the country, have been in short supply. The challenges with wheat arise from low local production, which in turn is a function of viability.

For the imported produce, forex availability has been the major deterrent and over the past few months importation levels under the facilitation of the central bank have grossly plummeted.

The price of bread has thus remained under control due to government’s influence on market. Across most players bread has become the least profitable and to some even loss driver given the regulated market prices. Players now divert flour to confectionary items other than bread, to protect value.

Lobels has a capacity to produce 340,000 loaves of bred a day at its Harare facility and 150,000 at its Bulawayo facility.

Started by the Lobel’s brothers in Bulawayo in 1957, the business was acquired by local consortium of local businessmen in 2002, who added a new bread line. In 2012, 5 banking institutions in Zimbabwe capitalised the operation to the tune of $4.5 million in a recovery effort which led to revival of production.

EQUITY AXIS NEWS

Respect Gwenzi

Respect is the Lead Analyst and Managing Director at Equity Axis. He has 8 years experience in respective fields of finance and media. Particular areas of expertise include Asset Management, Stockbroking and Financial Media. Respect is on a mission to change the course of Financial Media in Africa through digitalization

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