Arenel begins snack plant commissioning

DIVERSIFIED Bulawayo-based manufacturer, Arenel, has begun commissioning its snack plant under a $2 million investment that is expected to create about 300 jobs.

Chief Secretary to the Office of the President and Cabinet, Misheck Sibanda, visited the company in the Belmont industrial area last week accompanied by a delegation of permanent secretaries from ministries aligned to economic portfolios.

During the tour, management revealed its aggressive expansion plan that includes mayonnaise production and water purification, which is a big confidence endorsement on Bulawayo as an investment destination.

"The snack plant is currently undergoing commissioning with the potential to expand and add further lines. It will use new technology and innovative products," a brief note presented to Sibanda shows.

However, Arenel bemoaned the high cost of setting up required power or electricity structures for the new plant saying there was a need for the country to come up with a model that encourages investment by subsidising set up costs.

The firm said its mayonnaise making equipment would arrive in the country soon to produce 700t. Currently the bulk of Zimbabweans consume imported mayonnaise mainly from South Africa.

The company is seeking a temporary protection from the government to facilitate market penetration and proposed a $1/kg duty for the imported product. It also requested duty relief and import permits for key materials that are not available locally.

Arenel was incorporated in 1961 with the head office, production and distribution based in Bulawayo. It has a small depot in Southerton, Harare. The company employed 581 people as at 2015.

It has invested $6 million in recapitalisation on its sweets, biscuits and distribution arms since adoption of the multiple currency system in 2009.

The company has also invested $2,5 million in a mahewu (traditional meal drink) production facility which was commissioned last year.

Arenel is one of the resilient companies in Bulawayo and is exporting to countries such as Nigeria and Uganda.

During the tour, management engaged the visiting delegation for support in terms of facilitating incentives for Bulawayo firms in the form of rebates in transport, power, export and council tariffs and also complained over pricing of local key raw materials such as sugar, which is sold on average at $140/mt more expensive than regional levels.

It also complained over timing, procedure and renewal processes of import licencing and permits.

Arenel has the capacity to produce in excess of 80t of sweets in 24 hours. However, imported lollypops still pose a challenge as the firm cannot compete with mainly South Africa on the basis of above stated challenges.

On biscuits Arenel retains the largest capacity in the country producing 100t per 24 hours. However, it faces a challenge in importing flour given skewed allocations by regulators.

The firm has also bemoaned monopolistic behaviour by sugar and flour suppliers over pricing, which compromises competitiveness.

The maheu plant on one hand has the capacity to produce 2,000,000 litres per month. The product, however, faces a challenge following amendment to the VAT Act that has seen the company failing to claim input VAT on essential packaging material and services.

As a result the imported maheu product lands in the country 15 percent cheaper than the local product.

Arenel has since engaged the government seeking allocation to import full cream milk powder at suspended duty and proposed a $1 per litre protection on imports and permitting quotas if local manufacturers cannot fulfill demand.

Management also sought a review of excise and levies for fuel, which is used as a medium in production. It requested for a system where biscuit manufacturers can benefit from reduced taxes on diesel.