MHAMUD CHARANIA

Mozambique 2020 | AGRICULTURE | VIP INTERVIEW

TBY talks to Mhamud Charania, Chairman of MEREC Industries SA, on the FMCG market, the company's growth plans, and increasing exports in the coming year.

You sit on the board of different companies, ranging from the fast-moving consumer goods (FMCG) sector to agro-industry. What impacts of COVID-19 have you observed across sectors?

At the beginning of the lockdown, we saw an increase in demand for essential FMCG, which has kept steady until today. On the downside, we observed some problems in the supply chain due to a decrease in the volume of imports and ships arriving at Mozambican ports. We faced delays of up to 60 days. As a result, we have experienced lack of stock of raw materials or packing material. Another negative effect of COVID-19 has been the reduction in the supply of foreign currency and the depreciation of the metical, which has pushed the price of imports up. The entire economy is suffering and the market is volatile, so we have simply done our best to maintain a positive cash flow, while abiding by all the preventive measures set up by the Ministry of Health. Looking at the bright side, the COVID-19 crisis has proven that the domestic industry is capable of meeting demand, as there has been no shortage of items nationally. I hope this will serve as a lesson for the future and help us reduce our reliance on imports and increase local production.

How would you characterize the company's growth trajectory over the years?

MEREC started over 20 years ago with one maize mill producing 100 tons per day. In over two decades, we have seen impressive growth, now producing more than 2,000 tons per day with four premises: two in Maputo, one in Beira, and one in Nacala. We employ close to 520 people. We currently produce 268 tons per day of maize and about 1,500 tons per day of wheat. We also have three pasta plants producing more than 200 tons per day. We export pasta to Malawi, South Africa, Zimbabwe, and Zambia. We are also capable of producing of 24 tons of biscuits and 280 tons of animal feed per day. MEREC's growth was temporarily halted in 2016, following the hidden debt crisis, when the currency rapidly devaluated from 30 to 80 meticais to the dollar and interest rates increased from 12% to 30% in the space of just a few months. This forced us to bring private equity in the company. From 2019 onward, we started recovering, despite being hardly hit by cyclone Idai in Beira, where our facility was down for almost 60 days. Now, we are looking forward to the end of COVID-19 so we can finally find opportunities to grow.

What are the best opportunities for growth in the local market?

Mozambique's population is rapidly growing. According to some estimates, it will double in 20 to 30 years. We mainly cater for the urban population, since rural households normally grow their own crops. We estimate the urban population to grow in this timespan from the current 36% to 50%, with a subsequent increase in formal employment and purchasing power. Therefore, it is reasonable to expect demand for our product to double. We are accompanying this growth not only by increasing production capacity, but also by entering more and more into value-added products, where we expect to see growing demand in the future. We are already seeing a growing interest in the market for products such as pasta, biscuits, and bread, which was virtually non-existent when we first started; we are in the process of converting part of the wheat or maize flour we produce into value-added products, including specialty flour for products such as muffins or croissants. Similarly, on the protein side, we have a observed a gradual diversification of consumption behavior from fish to poultry. We will see the same happen with meat in the near future. For our business, this means a foreseeable increase in the demand for animal feed. Overall, we are adding value to our produce and by doing so we are solidifying our brand. We are brand conscious and we want to create a bridge between the different segments.

How should Mozambique leverage its agricultural potential and boost exports?

Mozambique has an enormous potential not only to serve its rapidly growing population, but the region as a whole. The country's large surface of land available for agriculture a well as its ports have endowed it with a competitive edge to South Africa, which is currently the main agricultural supplier for the region. To the contrary, Mozambican production is mainly oriented to the local market. A major obstacle, in my opinion, is SADC agreements for exports, whereby SADC countries have somewhat agreed on an open borders policy. While Mozambique adheres to this, the same cannot be said for other countries. This results in foreign goods obtaining easy access to the Mozambican market, while Mozambican exports struggle to remain competitive abroad, as they are subject to surcharge tax or certification requirements. I believe that if neighboring countries were to open their borders and adhere to the SADC agreement, Mozambique would be highly competitive. Once this is in place, there is no reason why Mozambican products would not be able to accommodate for the growing demand in the region. Even on the global scale, Mozambique could play an important role as provider of specific lucrative goods such as coconut oil, but the lack of certification often means that local produce never leaves the country. As a market leader in the agro-industry sector, MEREC is pushing for certification and lobbying the Ministry of Industry and Commerce to invest in local labs that can produce international certification. This is key as it will allow us to reach new markets and increase our exports, thereby fulfilling our full potential.