Capital constraints hamper Olivine growth

Working capital constraints are weighing down Zimbabwe’s oldest Fast Moving Consumer Goods manufacturer, Olivine Industries’ output, although it is now exporting 20% of its products to neighbouring countries, mainly Zambia and the Democratic Republic of Congo, managing director Jonas Mushanguri said this week.

Mushanguri  told a  South African delegation in the country for the fourth Investment Trade Initiative demand for this company’s products was high but  it lacked working capital and had archaic equipment.

He said  Olivine’s capacity utilisation was at 32%, adding the firm would require at least US$25 million for recapitalisation.

Olivine’s shareholders —  the Industrial Development Corporation of Zimbabwe and Aico Africa Ltd — are currently in the process of looking for investors to boost its operations.  Aico bought a 49% stake in Olivine for US$6,8 million in 2007 following the exit of America’s Heinz Corporation.

Mushanguri said if the firm received new investment, the money would be put into new plant and equipment, reducing labour costs in the process.

He said further delays in injecting the required level of funding in the business would make it difficult for Olivine to regain its market share, which had been taken over by foreign brands.

In the last financial year, Olivine, whose financial results are reported under Aico, posted a loss of US$12 million. The group expects to reduce the loss to US$4 million at year-end 2013.
Mushanguri said Olivine imported most of its raw materials as the country’s agricultural sector had crumbled after the fast-track land reform.

He, however, added that currently the imports were skewed towards finished products which they repackaged, as this was cheaper than importing raw materials that had to be processed.

The soap plant currently uses imports pulp serene in liquid form or chips that were processed plant for the production of bath and laundry soaps.

On electricity supply, Mushanguri said the company receives 75% of its power directly from the national grid and this had improved operations slightly. The remaining 25% was from generators.

In February, Olivine bought three 850KVA generators for its Birmingham factory. The Willowvale seed crushing plant is currently operating on Zesa power but utilisation remained low due to low crop production.

Olivine began as a small family-owned business in Nyazura, Manicaland in 1931, before moving to Harare.

From manufacturing its flagship cooking oil, Olivine the company has added a whole range of other brands over the years, such as Perfection, Buttercup, Jade, Harvest, Dolphin, Jade, Vegol, Soyola and Sunseed among others. Olivine also makes candles under the Luna  brand.