Thursday, December 9, 2010

Bakhresa Grain and Milling (Malawi) Limited: From scratch to success

By Richard Chirombo
When Bakhresa Grain and Milling (Malawi) Limited took over the operations of Grain and Milling Company Limited (Gramil) on December 6, 2003, many doubted the rationale behind such a decision as they could not share the vision of a highly potential, viable enterprise; instead, they remembered the doom and groom that was Gramil, and dismissed all short-term possibilities of resuscitation.



After all, Bakhresa was inheriting not fortunes, but remains of an ailing company with nothing to boot in its books. An insolvent company- owing banks, foreign and local suppliers, and the Malawi Revenue Authority in excess of K500 million- has never been a good idea for investment purposes. Such was the case for Gramil.

But the new investors, Bakhresa, saw a future out of these tatters, and committed themselves to clearing the dark clouds for the grains (maize and wheat) processor, banking on vast experience from such countries as Kenya, Tanzania and Uganda- the other countries with Bakhresa operations.

Bakhresa’s vote of confidence in Gramil received a seal of approval from State President, Professor Bingu wa Mutharika, on May 20, 2006, when the first citizen commissioned the company’s headquarters in Limbe- ostensibly sanctioning a new era for the company.

As Bakhresa-Malawi Chief Executive Officer, Mahesh Josyabhatla, enthuses, the company has never looked back.

“Due to the favourable economic conditions prevailing in the country, consumers’ purchasing power has also increased, raising the demand for our products, including flower,” he says with a grin.

What has also changed is the fact that, whereas Malawian consumers have for decades opted for foreign products, thus sneering at Ministry of Industry and Trade’s campaign to ‘Best Buy Malawi’- a drive backed by Mutharika during this year’s International Trade Fair- this perception has also changed, in the words of the Bakhresa CEO.

”Actually, there was a time we had no room for exports when we were producing 250 metric tonnes per day. This prompted us to increase our production levels to 500 metric tonnes (current production level); this is more than Malawi can consume.”

Just on August 25, 2010, the company was in the process of exporting 1000 tonnes to Zimbabwe, but the actual demand from the Southern African Development Community (SADC) member state is 2000 tonnes, pointing to huge foreign demand.

It is one good example of investment made good. However, this is not only peculiar to the Malawi scenario, as building success from scratch seems to be the age-old motivational factor behind the Bakhresa brand, a feat that dates back to the early 1970s.

Before the establishment of what has become Bakhresa Group in 1983, with operations in Kenya, Tanzania, Uganda and Malawi, one boy dropped out of school at the age of 14 to start a humble restaurant in the port city of Dar Es Salaam. His name was Said Salim Bakhresa, the man who worked his way up the ladder from a potato mix seller, shoemaker to an accomplished industrialist.

This innovative spirit was at play when Bakhresa bid for the sinking ship that was Gramil, and won- taking over 100 per cent of the government stake in the formerly state-owned milling company. It is the company’s aggressive investment plan that did the trick and swayed the Privation Commission.



Among other initiatives, Bakhresa unveiled a business plan which included an investment commitment of not less than US$9.92 million (MK 1.09 billion) in working capital, rehabilitation and expansion of facilities during the first year of operation. This included the construction and extension of silos for the storage of wheat.



All these initiatives fed into government’s strategic plans, which included the need to identify technically competent private sector investors. It entails a company that could inject more working capital, bring in new technology, improved management, technical and marketing skills apart from initiating a massive asset rehabilitation programme for equipment that was becoming obsolete. Such a friend was found in Bakhresa.



Today, some seven years down the line, the company has surpassed all expectations. Josyabhatla says the company is now experimenting with wheat farming at its Namwera farm in Mangochi, where the grain is grown over a 470 hectares stretch of land. So serious is Bakhresa with the trial initiative that it had to summon experts from Israel.



“We are hoping that this will help reduce supply gaps, and add on to between 3000 and 5000 tones of wheat grown locally. Malawi does not produce enough wheat because of overdependence on rain-fed agriculture. The other problem is that in winter, the favourable time for wheat growing, we don’t have rains in Malawi,” laments Josyabhatla.



He challenges that Bakhresa-Malawi is ready to engage Malawian farmers on contract farming, promising to purchase all the crops harvested. He adds that the company sometimes offers higher returns than were agreed with farmers in the hope of making farming viable and attractive to locals.



To attempting to make up for supply deficiencies, the company is faced with a myriad of challenges, especially when it comes to transport wheat from its silos within the port of Nacala in Mozambique. The only viable means of transport are road and rail.



Josyabhatla says rail transport has proved too unreliable because of capacity constraints. Rail operators have so far failed to meet Bakhresa’s capacity demands while rail transportation is both expensive and hampered by poor road conditions.



This is true for the first 25 km from Muloza to Mukubwe. Though 25 trucks currently ferry wheat from Nacala to Malawi, high operational costs mean increased expenditure, a development that could have dire long-term consequences since it is customary for what processing companies to import the crop.



Except for Zambia, all countries in the region import. Only that they do not import wheat flower (because that would mean exporting employment) but wheat grain (the raw material). This has proved a plus for many countries, since they are able to attract more returns after processing.



But the story of Bakhresa-Malawi is not complete without looking at the many business portfolios the company is focusing on. This includes soap manufacturing, among others. In fact, Azam soap has become one of the country’s leading brands it is becoming overly difficult to meet growing demand.



Josyabhatla says all these developments point to innovativeness at Bakhresa, and promises more to Malawians. It is a story so inspiring one forgets the many years of Gramil’s unsatisfactory performance due to technical capacity underutilization, insufficient working capital, and over reliance on stretching credit terms with its suppliers and banks to finance its operations.



It is a story so mired in victory; a sure sign that planning never ends at Bakhresa. What with plans to expand to other parts of the country? It keeps Josyabhatla so busy most of the time.

2 comments:

Chifundo Kadiwa said...

This is a fascinating success story of a Malawian Company, few people doubted the success of this company when Bakhresa took over but now they see a different picture. I believe it's vision, ideas plus experienced human and momentary capital has helped it to reach this stage. Keep it up Bakhresa, tobacco will soon be phased out and maybe wheat will replace tobacco.

Muhammad said...

Hi richard

This is muhammad from Nyasa Today in Malawi

I would really like to put this article into my magazine.

Do I have your permission?

Please reply to nyasa.today@gmail.com

Thanks

Muhammad
+265 999 559 928
Publisher of Nyasa Today