DAIRY producer, Dairibord Holdings Limited (Dairibord) will expand its production capabilities to regional markets to optimise and maximise its export earning potential. Dairibord will also use its capital expenditure (capex) for the year to increase capacity and replace some of the aged machinery. In an interview with our business reporter Tafadzwa Mhlanga (TM), Dairibord chief executive officer Mercy Ndoro (MN) gave full details of the firm’s strategy for regional expansion.
TM: Your products have been under the spotlight recently because they have a South African address bearing the place where they are manufactured. This has been the case, especially on the packaging of milk. Is it a product coming through your toll manufacturing arrangement in that country?
MN: The Steri Milk product was indeed produced in South Africa under a toll manufacturing arrangement. The Steri Milk in question was not imported into Zimbabwe by Dairibord. Its presence in the country can be attributed to cross-border smuggling. The domestic market continues to be served by products manufactured at the Dairibord Chipinge plant.
TM: How has business been in South Africa compared to Zimbabwe, and would you say there are efficiencies that have improved in South Africa?
MN: Dairibord has previously experienced challenges in fulfilling export market demand for some of its products.
The establishment of toll manufacturing now enables our customers to collect product within South Africa, eliminating the need for transportation from Zimbabwe.
It has also improved product supply in South Africa and surrounding markets, particularly Botswana.
TM: Zimbabweans have been worried that you have stopped manufacturing in Zimbabwe. Could you make a clear comment on what is happening for the benefit of the people?
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MN: Dairibord notes with concern various online media reports on the purported closure of its Zimbabwe operations and subsequent relocation to South Africa.
The position is that Dairibord has a longstanding history of successfully exporting its heritage brands to South Africa and other regional markets, failing to meet demand. Resultantly, Dairibord has initiated strategies to optimise supply and distribution channels in South Africa. The intention is to replicate this model in adjacent markets such as Zambia, Botswana and Mozambique.
This will increase the company’s foreign currency generation capacity which will not only benefit the company, but also the country at large. The Africa Continental Free Trade Area (AfCFTA) makes regional positioning a major strategic priority.
Dairibord remains firmly committed to its Zimbabwean roots and will continue to operate within the country. The company is investing in capacity enhancement to support its growth ambition.
These investments are a clear demonstration of the company’s confidence in its future, and unwavering dedication to serving the local and regional markets.
With a proud history of over 70 years, Dairibord is a trusted and reliable brand that has consistently delivered high -quality products to consumers.
Dairibord remains steadfast in its commitment to providing quality, nutritious milk, food, and beverage products to Zimbabwe and beyond, as the Zimbabwean operations remain the backbone of the expansion drive.
TM: Companies have been complaining about the cost of doing business in the country, and the Confederation of Zimbabwe Industries recently noted that companies have overhead costs of about 20% from taxation only. Has it been the case with you, and how are you tackling the pressure?
MN: The cost of doing business in Zimbabwe is a significant challenge for many companies, and Dairibord is no exception. The impact of new taxes and legislation have also presented severe business viability challenges. The promulgation of the special surtax on sugar content in beverages, the re-designation of the Value Added Tax status of milk from zero rated to exempt, the increase in the Intermediated Money Transfer Tax, and high cost of compliance have resulted in notable cost pressures and cash flow challenges. However, as a company, we are employing various strategies to mitigate the impact of these cost pressures, including:
Cost reduction through streamlining operations and improving efficiencies;
Exploring new markets in order to improve our revenue base;
Advocacy and engagement with the government to influence policies that promote a more favourable business environment; and
Use of technology and innovative solutions to improve productivity, reduce costs, and enhance competitiveness.
TM: What is your outlook for this year?
MN: In 2025 and beyond, the company’s growth strategy will be anchored on volume growth and cost reduction, mainly driven by:
Investments to support key brands;
Continuing and enhancing toll manufacturing arrangements in South Africa;
Regional market development by expanding distributors and diversifying the product portfolio;
Continuous route to market optimisation; and
Cost containment and cost reduction initiatives.
TM: How much have you set aside for capital expenditure (Capex)?
MN: The Capex investments for the year will be focused on increasing capacity and replacing some of the aged machinery.
TM: Are there any new projects on the cards?
MN: As previously mentioned, several new projects are under development, primarily focused on capacity enhancement and the replacement of aging equipment.
Furthermore, the solar project in Chipinge is progressing as planned. This initiative will mitigate downtime caused by frequent power outages and reduce our dependence on diesel-powered generators for backup power.
TM: How would you say the currency issues have affected you over time, especially the 43% devaluation that happened in September last year?
MN: The exchange rate instability that was prevailing over time resulted in pricing distortions in the market which increased the cost of inputs for Dairibord.
The lack of cross-border fungibility of the ZiG also resulted in foreign currency shortages as importers such as Dairibord faced challenges in sourcing foreign currency to import critical raw and packaging materials.
When the 43% devaluation occurred at the end of September 2024, the group incurred foreign exchange losses on ZiG receivables.
TM: How is your export performance currently compared to the previous period from both Zimbabwe and South Africa toll manufacturing projects?
MN: Export growth is a priority for the organisation, for foreign currency and revenue generation. The company’s objective is to achieve a 100% increase in export volumes within the current fiscal year.
