Although Africa has seen several years of solid economic growth, this year both the continent and the Tanzanian beer market have been under pressure. Compared to 2016, the beer market is down about 8%, with spirits even more. The fact that a beer market is in decline is typically a reflection of how an economy is faring more generally. The business community in Tanzania is concerned, as we are not seeing the levels of growth one would expect in an emerging market. However, in the mid to long term, we see positive macro economic and socio demographic parameters and are optimistic with regards to the economic development of Tanzania in general and the beverage market in particular. Beer is a rather inelastic product, and the development of the beer market is directly related to the availability of disposable income at the consumer level. With 70% of our raw materials coming from farms in Tanzania, a growing beer market will also allow us to expand our agricultural program and further support the development of local communities.
Managing Director, Serengeti Breweries
Dr. Toby Bradbury
CEO, Shanta Mining Company
In 2015, we established a plan to transition Luika from a completely surface operation into a blended underground-surface mine with a view to becoming predominantly underground in the future. There is a significant amount of investment needed in infrastructure to achieve such ambitious projects. In 2016, we undertook a financial restructuring that ensured we had all the funding needed in order to deliver. In the same year, we generated USD50 million of EBITDA from USD107 million of revenue—a high margin operation. For a small company such as ours, we invested substantially at New Luika with USD55 million in capital in 2016, 10% more than our EBITDA. We encountered some problems, however, following the government's decision to delay the outstanding VAT repayments. Without those funds, we had to stop investment in exploration and the development of the Singida Project. To save the company, Shanta had to raise equity at a deep discount to the market, which reflects the significant sovereign risk that Tanzania now represents.
Dr. Said Mzee
Managing Director, Zanzibar State Trading Corporation (ZSTC)
We sell cloves as a raw product in small quantity and in bulk to various markets. Our top consumers are India and Singapore. Aside from this, we also process clove stems to make clove stem oil. We have a distillery in Pemba where we make various types of essential oils—eucalyptus, lemongrass, and clove leave oil—that can be used in massage therapy. For this, our biggest market is the UK, though China is on the rise. Moreover, we have launched a product of branded spices called “Zanzibar Exotic.” This is a selection of four spices—pepper, cinnamon, chili, and cloves—in our own packaging that we sell to local hotels, shops, and airports. For now, we are not entering the European market, though this is our eventual aim. Our products are all naturally organic, which lends itself well to the European market. We are undergoing contract negotiations with an GANEFRYD company from Denmark for organic products.