SOUTH AFRICA-South Africa’s inconsistent power supply combined with the impact of rising input costs have led to an 18% increase in white and brown bread prices according to Pietermaritzburg Economic Justice & Dignity group.
The analyst claim that load-shedding continues to ravage the high-volume low-margin business which is highly sensitive to falling volumes causing consumers to dig deeper into their pockets to afford the commodity.
The country has experienced load-shedding since 2007 which is believed to have been caused by the country’s failure to build new power stations to keep up with economic growth and replace aging generation plants.
Talking to Business Report, Craig Binnion, the executive director of the South African Chamber of Baking (SACB) warned that as the baking industry faces rising input costs and load shedding could be the final nail in the coffin for many.
Mr. Binnion pointed out that, the baking industry is facing lots of challenges from increasing flour costs, electricity costs, diesel costs, load shedding, the collapse of infrastructure, and unrealistic union wage demands.
However, Binnion said that the challenges can be mitigated through continuous adjustment, planning, and management to lessen the economic strain on productivity and outputs.
According to him, the continued power supply problems have caused damage to loaves within the system resulting in the disposal of an average of 8 000 loaves every time a power outage happens, forcing bakeries to invest in massive generators at a huge capital expense.
He also warned that if the situation continues, it could force the closure of small bakeries due to unaffordable running costs, resulting in job losses.
“We are dealing with a living biological product. The production system cannot be stopped and restarted again once the power resumes. The modern plant bakery is a fully automated system with many time-sensitive environments within the baking system,” Binnion said.
The industry has been struggling since last year as the costs of ingredients surged after Russia invaded Ukraine, which saw a massive spike in wheat and diesel prices from R5950 (US$338) to R8300( US$471) a tonne, an increase of a whopping 34%.
Furthermore, the baking industry is not alone in this call, with the SA cane growers Association, and the Agricultural Business Chamber, among others, also urging Eskom and the government to come to the table with solutions.
It also includes retail/emerging/independent bakeries like Globakeries, Bimbo QSR South Africa, Famous Brands Management Co, Zeelandia South Africa, Goosebumps, Pick n Pay, and the Spar Group, as well as several supplier and associate members.