Zimbabwe’s brewery giant Delta Corporation reported significant growth in volume and revenue for the fourth quarter to March 2018. This helped the group recover from four years of recording volumes and revenue decline, something which started in 2014 till 2016.
According to the trading update released by Company Secretary Alex Makamure, this growth could have been more had the company not faced supply constraints.
“There were pronounced product supply gaps occasioned by the challenges in acquiring imported raw materials and services as access to foreign currency has become increasingly difficult,” said Makamure.
He added that, “there were some considerable disruptions to the supply of Chibuku Super due to capacity limitations impacting suppliers of key packaging materials.”
While the issue of limited raw materials supply might seem to be a Delta specific problem, it speaks to the supply gap that exists in the economy as a whole as most manufacturers continue to import manufacturing inputs and final products for their operations.
Fortunately, it also speaks to the potential to which local suppliers can leverage on the country’s vast agricultural resource base and lift the level of local content.
As Zimbabwe expects a surge in interest from multinational companies to invest in the country, suppliers have their work cut out to lift the level of local content so that they can take advantage and meet demand.
Sourcing locally allows not only Delta, but all other local companies to save on import costs, preserve foreign exchange and contribute to the economic development of the country.
Delta endeavours to source all its raw materials and services from local suppliers, according to Patricia Murambinda, the Company’s Corporate Affairs Executive, but unfortunately sourcing these goods from local farmers is not easy as buying raw materials from smallholder farmers is not done overnight. Rather, it is the end-result of a multi-faceted process that probably includes giving the said farmers, financial and technical support. It also encompasses teaching farmers’ improved agricultural practices.
Beer is typically made from malted barley, hops, yeast, and water (for most lagers), while traditional beer requires sorghum and maize. All these crops, with the exception of some varieties of barley and hops, are grown in Zimbabwe by smallholder farmers. Delta has since 1974 been involved in farmer development programmes in one form or another involving barley, sorghum and maize.
For some of the raw materials, such as maize and sorghum which can be produced locally, Delta makes use of contract arrangements with small-scale farmers.
Delta has in place a Beverages Sorghum Contract Farming Scheme (BSFS), a farmer development programme through training and extension support, ensuring accessibility of farming inputs in order to guarantee future supply.
In an effort to get the requisite supplies, Delta offers a free and extensive quality assurance programme that ensures access to technical information by growers, improved yields and grain quality. The farmers are also supported with input finance in the form of agricultural inputs.
According to Murambinda, the brewer has put in place local sourcing programs such as contract farming for barley with all requirements sourced locally.
Delta also uses contract farming for sorghum grain and Murambinda says the scheme covers both communal and commercial farmers with a bias towards the communal. Most barley farmers are also engaged for the supply of maize mostly for summer cropping.
While efforts are made by manufacturers to work with local farmers, there are other impediments that continue to make it very difficult to source locally.
Other hurdles holding back the development of local sourcing initiatives – include poor connectivity, high costs of production and limited access to funding. The quality of raw materials is also a major problem.
According to Murambinda, all of the Company’s products use specified materials in order to meet the set final beverage quality in line with franchise or trademark requirements and this means product quality must adhere to good manufacturing practices.
“Delta endeavours to source its raw materials and services from local suppliers; subject to the issues of supplier performance, pricing, product quality and adherence to good manufacturing practices,” said Murambinda.