Around 500BC, a Greek Philosopher named Heraclitus, cleverly surmised that "the only constant in life is change". Amidst continuing economic depression, massive fuel increases, poltical and social changes and who can forget ‘breadgate' - it seems there is no quote more appropriate for the times we are living in today.
In Finance Minister Pravin Gordhan's February budget speech, he presented a balanced, fair and conservative outlook to South Africa's financial situation. Despite the disappointment, and in some cases outrage, at the 25.5cents per litre fuel taxes increase; it appears that public, political parties and economists alike were satisfied that the minister is fulfilling his constitutional commitment to social and economic justice for all.
Gordhan's admirable request to "balance the pursuit of profit with social justice" blends well with his view that "with jobs come dignity". Although brilliant in theory, how do we, as participants in the basic foods industry, put this into practice - especially when one considers the cost of supply chain management whilst factoring in the ever-increasing fuel and raw material logistics costs?
The ‘breadgate' saga; where the ‘ David' of the bread industry (Mr. Mukkaddam) succeeded in blowing the whistle on the Goliath-proportioned collusion among South African bread companies perhaps illustrates the climate of change to which the previous oligopoly industries have arrived in.
Another recent industry change that has sent shock waves through the milling community has been the resignation of Premier Foods in February from the National Chamber of Milling.
Mr. Ian Visser, Chief Executive Officer of Premier Foods motivated their decision in a recent NCM circular by stating
"These Chambers have a long history and this decision was not taken lightly. Premier has found itself increasingly at odds with the strong agricultural focus of the Chambers, but on the whole it was felt that in other matters the Chambers served the industry well.
A sea-change has however occurred and the existence of industry Chambers, especially in industries in the national interest will in our oppinion not be politically and socially defensibe in the future."
The NCM responded to this by saying that they regret the loss of Premier Foods as a member, (a founding member since 1936) "especially in these difficult times of reshaping the industry".
These difficult times of reshaping the industry.
After 60 years of a regulated market, 12 years ago there were just 27 mills in South Africa. Today, in just ten years of deregulation, African Micro Mills has over 700 millers on our database. 10 years ago oil was just $12 a barrel; last year it climbed to $140 a barrel. Today oil is ‘just' $75 per barrel.
Today, and in the future, more and more your of your business is about competitiveness and being commercially driven.
Another very wise individual, a modern-day philosopher of the 20th Century, built on Heraclitus's original words by saying
"The only constant is change, continuing change, inevitable change, that is the dominant factor in society today. No sensible decision can be made any longer without taking into account not only the world as it is, but the world as it will be".
In these "sea-change" times, all industries and related industries need to take into consideration the changes that are happening around them, and that are going to happen around them, in order to adapt and function at optimum levels in the future. The Darwinian sink- or-swim theory bears crucial relevance here.
Factors such as increasing fuel and logistics costs need careful consideration. Are you, as a baker, able to bear these costs without passing on the huge costs to your customer (and in the process, loose customers due to economic constraints). Whether in basic foods or speciality baking, this is still a make-or-break factor.
In addition to the specialised needs of bakers for niche raw materials that we have already covered in this column, perhaps the increasing fuel, and hence logistics costs, call for a revised way of sourcing raw materials - a change in the way business as we know it is done.
As a baker, are you aware that you can reduce the cost of your biggest input costs by as much as 50% by milling your own flour? How about being able to control your own flour moisture and protein levels for biscuit manufacture or pizza bases? Have you considered combining your efforts with a local farmer to ensure /offer 100% organic products?
Localising supply chain management and reducing the costs added by the vast physical distances (that may not have been an issue in the past due to lower fuel prices) is a definite solution. With the advanced technology now available for low-skills resources and the back- up services in place to facilitate new market entry, independent supply and sourcing is a distinct possibility.
Understanding the nature of the market, as it is now and in the future, is the key to profitable operation in the grain milling and basic food production sectors of Southern Africa. Speak to us at African Micro Mills to find out how you can make the most out of these tough economic times and prepare yourself for a profitable future.
A wide range of localised milling solutions, ongoing support, HR solutions, mentorship programmes, feasibility studies and other advice, will help you capitalize on these ever-changing times in Southern Africa.
As always, we look forward to hearing from you. If you have any comments or queries then please do get in touch with us at African Micro Mills (through our website www.africanmicromills.com) or via this column at millersgrist@africanmicromills.com
