Ingwebu out of the woods . . . Shelves initiative to raise US$20m working capital
Oliver Kazunga, Acting Business Reporter
INGWEBU Breweries has shelved plans to raise US$20 million working capital as the brewery has emerged from the woods.
In October 2018, Ingwebu, a Bulawayo Municipal Commercial Undertaking announced that it was scouting for investors to inject about US$20 million working capital for retooling.
In an interview on Monday, Ingwebu Breweries chairman Mr Concern Sibanda said they have shelved the plan as the beverages producer has come out from a loss-making position to a sound financial footing following the successful implementation of a turnaround strategy.
The turnaround strategy, has seen Ingwebu introducing new product lines like the 1,5 litre and 2-litre calabashes of opaque beer and diversifying operations into mahewu production as well as continued improvement in capacity utilisation levels to 95 percent from 65 percent in the previous years.
“We actually had to shelve that plan for the simple reason that obviously you seek capital from other sources in order to do your operations or expand operations.
“But as we say, we’ve been able using our own internal resources to generate enough working capital and turn around the company so that we are not in a loss-making position anymore, that has meant that the need for that recapitalisation has actually receded, therefore, we have shelved that,” he said.
Mr Sibanda said the US$20 million working capital raising initiative had been shelved in agreement with their major shareholder, Bulawayo City Council (BCC).
“We are not into that anymore, we think we can drive the organisation using our own internally-generated resources,” he said.
Over the years, the brewery faced viability concerns underpinned by falling demand for its products and the high cost of operating its antiquated equipment.
That negatively impacted on its ability to contribute any revenue to the local authority.
Last year, BCC announced a plan to privatise Ingwebu Breweries as part of a strategy to turn around the previously loss-making commercial undertaking into a financially sound private company.
However, despite reflecting a positive operational trajectory, the company’s managing director Mr Dumisani Mhlanga in a separate interview, highlighted that his entity was not sparred by the adverse macro-economic challenges. Such challenges included intermittent power supplies, inflationary pressures, and foreign currency shortages.
“You will recall that in the months that have gone by, the power outages were frequent and long in terms of hours and that obviously impacted on our operations quite a bit. And of late, I could also presume that one can also say there are escalations in prices of some inputs mainly meal, that too has an impact unfortunately. “But I think we still keep our head above water as of now,” he said.
Mr Mhlanga said Ingwebu requires an average of between 1,2 million and 1,3 million South Africa rand per month to import packaging material for Shake-it, which is one of the beverages manufacturer’s product presently not available on the local market.
“The packaging material for some of our products like the Shake-it, comes from outside the country and we have had challenges in raising the forex that is required.
“That is why that product is not on the market today. But it’s quite a popular product that if we introduce it today, we are certain that it will add to our volumes and hopefully with time during this year, maybe we’ll get a bit more forex and then bring that product on the market again,” he said.
The brewery also requires foreign currency for plant and equipment spares.
“We have had to buy our spares here where we are looking at pricing that is nine or 10 times what you possibly buy if you are to source that from South Africa,” he said.
Ingwebu Breweries was established in 1946 as a department of BCC and in 1996, council established a wholly-owned business entity called BMCU. — @okazunga