ALL THE RIGHT INGREDIENTS

Ghana 2016 | AGRICULTURE | INTERVIEW

TBY talks to Michel Ghajar, Operations Manager of Takoradi Flour Mill Ltd., on the current state of the milling sector, shifts in global ownership, and the challenges to operating in Ghana.

Michel Ghajar

What is the current state of the industry from Takoradi's perspective?

The capacity of our mill in Takoradi is 18,000 tons per month, and we are working at around 65% of that. All of our buyers are locals, and we go directly to them, cutting out intermediaries. We have eight depots throughout the country, and we store up to 10,000 bags in each of them. Depending on the market and demand, we supply our depots accordingly and they handle the transactions and sales. Grain imports have doubled since 2003. The demand is high and distributed throughout the country, so we go directly to our buyers and pass on the lowest price that we can so that the clients can profit from affordable supply costs and we can increase our market share. The issue is that there are new players in the market with China, Gafco, and now Olam having arrived. Along with the Irani Brothers, Takoradi Flour Mill is the oldest in the country. There are around five flourmills in Ghana, so there is overcapacity of production and the competition is fierce.

Some players in Nigeria have sold their wheat mills and there is a lot of activity and investment going on in the sector. Are you expecting similar activity here?

There is an ongoing shift of investors. From the 1960s through the 1980s, the major investors, especially in Africa, were primarily French, Italian, British, or Australian, each with their own fields. The majority of investors today are from India or China, and this shift is a global phenomenon that now extends beyond Ghana. I envisage a shift in ownership in the next 20 years from Europe to Asia, but this makes little difference for us. The regional trade alliance is not working well, but this is beyond our control. The government is trying to improve this, but the public sector needs to collaborate with the private sector to better assess the current problems. Based on this open-forum approach, we can then provide more useful information. We have been here for a long time and have a loyal client base. Our hope is that Ghana shifts its attitude more toward problem solving, rather than avoiding problems and shuffling issues and bottlenecks away from attention. We have always believed in Ghana, and we are optimistic about the future opportunities that it holds.

What have been some of the biggest challenges that you have faced recently?

The majority of our grain comes from Canada and Europe, which has caused us some problems, as we pay for imports with the appreciating US dollar, while the cedi continues to depreciate. This has affected us a lot, and the exchange rate is changing daily. A vessel of wheat costs $2.5 million, so we are losing about 400,000 Ghanaian cedi. We manage with this price as best as we can. We could try to absorb it for a short period of time until the situation becomes unbearable, after which point we would have to raise our prices. We planned well, and when the economy was doing well we expanded and reorganized the company because there was money to be made. Profit margins in 2016 are shrinking, while competition continues to grow. Another problem is the increase in fuel prices being passed on to consumers, which was a necessary move. The government has been subsidizing fuel a lot, while in reality it cannot afford to incur such costs. The public sector has to change its spending habits. One liter of petrol costs almost 4.9 cedi, or about $1.25. The government has said that it wants to subsidize the cost to remove financial strain from the consumer, as minimum wage earners receive just 400 cedi per month. It is important to be cost-effective these days, as anyone who is not will face significant problems.