At a National Economic Consultative Forum (NECF) meeting held last month, Savanna Tobacco chairman Adam Molai made a case for value-addition in the country.
Molai, who founded Savanna in 2002, says he knows what he is talking about.
Founded over 10 years ago as a threshing plant in Harare, the company has become one of the leading producers of tobacco products and brands in Zimbabwe.
Today the company produces a selection of competitive cigarette brands such as Pacific cigarettes.
Its Pacific Storm brand is popular with smokers and rivals BAT’s premier brand, Madison. The company produces between 35 000 and 40 000 master cartons.
Tobacco threshing is a stage in tobacco processing that involves cutting the blade of the leaf away from the stem with a machine called a thresher, resulting in fairly small pieces of leaf blade suitable for use in cigarettes. The threshing process is a key operation in achieving particle size distribution of re-dried tobacco.
After acquiring a tobacco threshing plant in Harare in 2002 and reconditioning the machinery, the company began processing and packaging cigarette stems and selling them to a number of cigarette factories around the world.
Within the first two years of operation, the company had sold over three million kilograms of farm stems. Following the success of the threshing business, Molai went a step further to identify another opportunity to further add value to the Zimbabwean tobacco by manufacturing cigarettes for the export market. A decade later, the company has grown into British American Tobacco’s biggest rival.
Molai’s story is now history.
Back to the NECF meeting, he shared interesting numbers as well. For instance, he says while a kilogramme of unprocessed tobacco costs an average US$3 at the auction floor, threshed tobacco costs around US$7,30 per kilogramme, while cigarettes cost around US$30-50 per kilogramme.
In monetary terms, Molai says from the 162 million kilogrammes of raw tobacco sold last year and exported to various countries around the world at a cost of US$608 million, Zimbabwe could have realised as much as US$6,08 billion from finished cigarettes.
His story did not end with tobacco.
The entreprenuer also cited other sectors such as diamonds. While a rough diamond cost about US$40 per carat, a cut and polished diamond value increases to US$400 per carat.
The same stone fetches around US$600 per carat when it reaches the consumer.
Molai, who owns Zim Alloys, shared another familiar story.
He says chrome ore costs around US$210 per tonne, while high-carbon ferro chrome and other alloys cost US$870 per tonne.
With Zimbabwe’s annual chrome output at 150 000 tonnes and revenues from export of raw chrome ore of US$31,5 million against estimated revenues from beneficiation of US$130,5 million.
Molai said that government should create a business friendly environment, facilitate ease of doing business and reduce cost of doing business in the country.
He said there was need to create investment incentives for value addition to make it very attractive for companies within the next five years, address uncompetitive labour laws, policies and pricing, create special economic zones that facilitate greater ease of doing business and facilitate duty-free exportation of value-added products.
Molai added that there was need to formulate processes that encourage exports and not criminalise them, create transitional mechanisms in the achievement of chrome value-addition so that companies can recapitalise through creative financing structures, create sector champions made up of local entrepreneurs, ensure there is policy consistency on indigenisation and develop a totally new educational curriculum that develops entrepreneurs, not only labourers.
Molai’s insights on value-addition come amid calls by government to make beneficiation and value-addition of the country’s mineral resources compulsory, as part of the new mines and mineral policy, in order to fully extract value from minerals.
Government is said to be working working on a comprehensive beneficiation and value-addition policy of the country’s mineral resources as it seeks to shift from a resource based economy to manufacturing one.
Zimbabwe has plenty of minerals in PGMs which included chrome, lithium, iron ore, coal, gold, diamond, tantalite and graphite which hold great potential of unlocking the country’s mineral resource value.
When all these minerals are fully extracted, experts say the industry will utilise metallurgy process that extract all the valuable minerals in any specific mined ore.