GOVERNMENT’S failure to provide Real Time Gross Settlement (RTGS) fuel and the increase in United States dollars fuel prices have triggered the latest rally in the cost of producing bread.
As a result, a standard loaf of bread now costs more than US$2 after its price shot up by 30% to ZW$345.
The Grain Millers Association of Zimbabwe (GMAZ) last week also increased the prices of maize and wheat by 50% and 17,8%, respectively.
This, however, has further increased the cost of producing bread.
According to GMAZ, the country was currently consuming 16 000 tonnes of bread flour per month and approximately 1,2 million loaves of bread per day.
Zimbabwe will require to import 155 000 tonnes of wheat to mitigate the variance between local production and national demand.
National Bakers’ Association of Zimbabwe (NBAZ) president Dennis Walla said the sector has been hit hard by currency volatility and the absence of cheaper fuel, which also continues to affect the operations of the sector.
“First and foremost, I need to mention that as an association, we don’t determine the prices but our members, obviously based on their cost drivers and cost build-up, determine in terms of pricing that is actually taking place,” he said.
“If you are well aware that last week there was a press statement that came out from the GMAZ where they were highlighting increases in certain products.
“Our industry is within the wheat-to-bread or wheat-to-flour value chain and we are price takers. So if any major challenges or changes take place, be it in pricing and whatever within the value chain, we are affected. We used to access RTGS fuel but this is nowhere to be found,” Walla added.
He said unstable exchange rate and wages were the real issues crippling the industry.
“So these are the factors affecting the viability of the industry. The volatility of the exchange rate is not helping.”
Walla said there was a negative perception that the sector is profiteering yet the pricing is based on cost build-up mechanism.
Players in the sector said they have been engaging the government to highlight issues affecting the industry so that there are policy interventions.
“The subsisting global food inflation crisis is causing serious headwinds and Zimbabwe is not spared. Similar price increases of maize meal and bread flour are also being experienced in other regional countries, such as, Botswana and South Africa,” GMAZ said in a statement recently.
The local bakery industry continues to swim in turbulent waters as more companies fold operations due to lack of working capital, antiquated equipment and high cost of production.
The bakery sector is currently dominated by three giants (Lobels, Bakers Inn and Proton) controlling 95% of the market while smaller bakeries cover the 5%.