Reg. No. 2013/112031/07 2A Cachet Street, Ventersburg 9050, Free State Province. Inspired By Our Desire To Succeed

Transcription

1 Reg. No. 2013/112031/07 2A Cachet Street, Ventersburg 9050, Free State Province 1

2 Discussion issues About Lethabo Milling Company Resume Our Reason to enter the Market Our Vision and Mission The Purpose of the session Our Learning s to date Support we received as small scale millers Milling Industry structure and dynamics Our Road to success Our thoughts on the development of a milling franchise model Challenges faced by small scale millers 2

3 About Lethabo Milling Lethabo Milling (Pty) Ltd is a 100% South African black owned maize milling business and a new player in the maize milling industry. The Lethabo concept was conceived in 2010 All 2 directors are black with one being female Xolani Ndzaba is the CEO Lethabo Milling (Pty) Ltd is positioned in the market at the same competitive level with the industry's main players on price, product quality and customer service offering. Lethabo has created 44 jobs in Ventersburg an area that has a high unemployment and other social challenges. 40% of these employees are women and over 75% of the workforce is under 35 years old The milling plant is situated in a small town of Ventersburg in the Free State Province. The plant is built next to the N1 Highway giving us access to all the provinces in RSA and Lesotho The location of the milling plant and the distribution centre is the ideal location because of its accessibility to raw materials and to the market. We are in the quality maize triangle Mill full capacity is 16,500 tons per annum. We deliver directly to agreed locations as per customer requirements. We also have a depot in Johannesburg to service the Gauteng market. 1. Off Take Agreements Masscash Group To supply 10,000 tons per annum of Lethabo Super Maize Meal to Masscash Our pricing to the Masscash Group is based on the best market price less 3% FABCOS To supply 7,200 tons per annum of Homegrown FABCOS house brand United National Breweries We also have a sales volume commitment with the United National Breweries for 300 tons per month 2. General Trade We plan to access the general trade with our brands once when we increase production capacity 3. We believe in building customer value propositions and lasting business relationships driven by good service, mutual beneficial trust and integrity. 3

4 Our reason for Market Entry To progress the economic liberation agenda post the apartheid era in South Africa, there is a need to access and own industries that are largely reliant on black consumption but lack black supply from the production value chain side This in itself presented a business opportunity for us. Our mission and objective of market entrance are To increase the choice of company buyers for BEE suppliers in this industry To broaden consumer choices for quality black produced products in this case South Africa s favourite staple diet With more varied players in the market, price points will be managed downwards which in turn will favour consumers To increase route to market options to black farmers for better pricing terms and profitability 4

5 Vision & Mission Our Vision To be one of the top South African black owned milling companies within 5 years of operation through the following measures Commercial Performance Organizational Performance Sustainable Social Development. Our Mission Is to consistently provide high quality products to our customers in a commercially viable manner so as to create shareholder and stakeholder value. The long term objective of the business is to expand our product line and acquire a much bigger mill and to create more jobs in a region that has extremely high unemployment. To consistently meet and exceed customer, consumer and supplier, expectations. To develop and create upstream value chain partnerships with local black farmers 5

6 Our purpose in this session Lethabo Milling is invited to provide input on the following issues around : Development and implementation of a small-scale maize milling programme embedded in a franchising business model. Introduction of a support programme to facilitate the market entry of small-scale maize mills. Development of a milling skills development programme in collaboration with the Food and Beverage Sector Education and Training Agency. 6

7 Support for small scale miller Imperatives Dependency Support Provided Stakeholder Where to play and How to play Market research Business Case Research data Gap analysis Market Area Product segmentation Profit Pools Incubation training by ABSA and Masscash through their ED programme Start up Capital Business Case Business Gearing Margin analysis Business Loans Financial training Business Modelling Plant and Machinery Business Plan Funding to procure milling plant / silo s etc. ABSA Masscash DTI Staff Development Milling skills Training of staff NCM recommended by DTI Basic Business Skills Basic business knowledge Tertiary training Grain procurement and supply Pricing fluctuation Storage Reliable suppliers Route to Market Established customer base Compliance issues Business Management training programmes ( GIBS) Funding to procure Storage Silos ABSA DTI Off take agreements Masscash FABCOS 7

8 9. Business Systems and Job Creation The current industry value chain structure favours big established players They control : Market access Value Chain price economics Access to unprocessed produce Farmers Ideal Cooperatives Commodity Traders Retailers (Proprietary and House Brands ) C o n s u m e r Millers Emerging farmers have tied agreements due to lack of resources Value chain pricing and margins is dictated by the Cooperatives, Traders and Retailers Emerging or small scale Millers are also subjected the industry structural dynamics Inspired By Our Desire To Succeed 8

9 OUR ROAD TO SUCCESS The road we have travelled so far has not been a bed of roses. It was full of potholes and speed humps However we were determined to reach our destination despite all the challenges we were facing Challenges we had to overcome There are barriers to entering such a competitive industry which has big and dominant players mainly white The high cost of acquiring machinery Lack of access to capital due to stringent requirements from the financial institutions which affect most start up businesses especially SME Non availability of sales contracts from the big customers Lack of trust or confidence in our idea from identified market and financiers Finally the transaction was facilitated by Massmart in partnership with ABSA after we had signed an off-take agreement with Massmart Through the SDF: our business is able to enter the tough and competitive maize milling industry and deliver a quality product to our customers and consumers We will be able to create 40 + new jobs in the next six months Above all those challenges Lethabo Milling would like to take this opportunity to THANK Massmart and ABSA Bank for believing in our business idea and enabling us to MAKE IT HAPPEN 9

10 Development of a milling franchise business model Element Model Benefits Development of Regional Maize supply chain Recruitment of farmers with offtake agreements with regional millers Capacity Building Tandem franchising model wherein the state owns the equipment and land with a progressive buyout of the equipment and land over an agreed period Capability building Use attendance of training programme and outcomes implementation as an incentive Increase off take agreements Procurement of equipment Provide Mentorship Programme Use an industry compliance standards for licensing Employment creation Wealth creation Reducing number of players in the value chain enables the following Price reduction of basic food commodities to consumers Lowers barriers to market entry Increases margins for Millers and Farmers Farmers business sustainability Enforces asset care and management Skills development Monitoring mechanism Establish a Board to manage the Develop universal standards process or Overseer and monitoring mechanism 10 Use current institutions to manage

11 Small scale millers challenges Access to Finance Grain procurement Price fluctuations ( SAFEX) Access to credit Transport costs Access to established retailers Reduced margins Retailer s set selling price points Rebates Competencies Milling Skills General and Basic business skills Mentorship 11

12 Xolani Ndzaba Xolani Ndzaba and ABSA Board Members 27 June

13 Our Product 13