Could you give us an overview and historical background of Commodity Processors (Pvt.) Limited and its associated companies for which you are responsible, such as Rice Milling Company (Pvt.) Limited and Commodity Services (Pvt.) Limited?
The group consists of a number of companies. We have been in business in Malawi for over 40 years – it is a family owned business in terms of the majority shareholding. Major shares are held by the Mukadam family, with strategic alliances and minority shareholdings with external investors. We are involved in a number of items easily divided into two sectors, the first being food and agriculture, and the other being metal products including construction and packaging materials and property development.
On the food and agriculture side, the group consists of three companies:
Commodity Processors (Pvt.) Limited (COMPRO) is a company under the food and agriculture arm, we process and manufacture split lentils or toor dhal. This is a growing market, for two reasons: it is a basic food for the people originating from the Indian Subcontinent, and as the world is becoming more health conscious it is also becoming a very common food outside the Indian Subcontinent population, due to its mineral, vitamin and protein content, and its growth rate is tremendous. To further improve on that, most of the agricultural commodities grown in Malawi are grown without chemical inputs, so when you have a combination with a chemical free health food, growth rates are excellent. All COMPRO´s business is 100 per cent for export. We also trade in other agricultural commodities, such as pigeon peas, maize, sugar beans, chilies, chick peas, maize, soya beans, groundnuts, sunflower seed. All these agricultural commodities are for bulk export to other businesses that use them in the manufacture of their products or for pre-packing or canning.
Rice Milling Company (Pvt.) Limited mills, processes and packs rice, 50% of production going to the local market and 50% to export market. We do our own distribution nation-wide and regionally, and we have developed a strong brand name, Family Pride, and service network to extend the range of our business. Hence, we not only pack the rice but we also pack other food items, concentrating on basic commodities such as flour, salt and milk powder. This range of basic food commodities packed under our brand name is continuously being extended. The purchasing power of the majority of people in Malawi is not very high, so we can offer a basket of around ten basic food products, which families will need to survive. That is what we are concentrating on – we would rather target 12 million people locally than only 12 thousand people with luxury food products.
Lastly, on the food side there is Commodity Services (Pvt.) Limited, which is mainly a trading company, importing bulk foodstuffs into Malawi. The foodstuffs that are imported are either not produced locally in Malawi or are not produced in sufficient volumes to meet the demand. For example, wheat flour, milk powder, salt, cooking oil and infant porridge.
The countries, which we deal with, either for exports or sourcing imported products, include Zimbabwe, Botswana, South Africa, Mozambique, Zambia, then further afield Holland, Spain, the United Kingdom, Switzerland, Belgium, Spain, United States of America, Canada, India, Malaysia, Singapore, Fiji, and New Zealand.
There is a great need to diversify the agricultural sector in Malawi, as well as the base of imports and exports. Where does your company actually fit into the movements in this sector?
With Commodity Processors (Pvt.) Limited and Rice Milling Company (Pvt.) Limited, our target products are agricultural commodities which have already grown to a decent volume in Malawi, perhaps not at the same level as tobacco, cotton or sugar, but they are products which have potential of being processed within Malawi then sold for export. Some of the commodities may be only seasonally available, but are generally available at the right time of the year. Also, due to our milling capabilities we are generally adding value to a large portion of the volumes that we trade in. This adds value within the country and not outside its borders.
We are dealing in markets that are growing and also have an international range, so we are not restricting ourselves locally or even regionally. Therefore, in the next ten years we can see these particular sectors growing if we have the Industry and Agriculture Ministries working together to promote alternative crops, giving farmers the support they require, giving them the incentives needed to move from tobacco to other products, and ensuring that they have markets for these products as well.
As far as competition is concerned in this sector, who are your main competitors in Malawi?
On the rice side, I would say that there is limited competition. This is because the two traditional companies, which operate in the rice sector, have been monopolies in Malawi for the last 30 years or so. Since we have entered the market in 1996 we have shaken things up and one of the companies is actually seizing to mill rice this year. The other major company still mills rice but mainly for the local market. There are other smaller rice millers, but they do not have the state of the art machinery that we have to mill rice of international quality nor to the volumes required. So in terms of exports of rice we are really the main one. This is because we have built up a whole chain where we are working by providing inputs to farmers and guaranteeing a market for them, which allows them to work towards the following season. We are very aware of the need to maintain fair farm gate prices, and although there is always a little bit of friction between buyers and sellers, if the prices for farmers are too low and it is not profitable for them, they will not grow it. So we actually sit down with the farming associations across the country to come to a fair compromise on price levels.
Therefore with regards to Rice Milling Company (Pvt.) Limited, competition is actually decreasing in Malawi. I would like to think that it is because we are doing something right, not because the others are doing something wrong.
Commodity Processors (Pvt.) Limited exports all its products and therefore competition within Malawi is not as relevant as for Rice Milling Company (Pvt.) Limited. However, Commodity Processors (Pvt.) Limited competes truly on the global stage, both for the lentils and agricultural commodities. We ensure that our products are of the highest quality and that we have service levels that exceed the expectations of the customer. Also, we believe in building partnerships with our customers and see the relationship very much as long term and two way. Therefore, we also build loyalty amongst our customers, which ensures that our products have an established and long term market.
How do you deal with growing competition within these markets?
Over the last five years, there has certainly been an increase in competition for lentil and agro-processing companies. We believe strongly in total quality, from our procuring of agricultural commodities from the farmers through our milling and packing processes to our distribution and after sales service. Some of the other companies may have got stuck in a "sellers market" mentality and culture and have not adapted the quality of their products and service to meet modern demands of businesses and consumers. Also, as mentioned before we look to build long term partnerships with our customers and hence have a long term mutually beneficial relationship that will survive any 'rough or turbulent patches' in the market.
However, what is becoming a problem are companies regionally, outside of Malawi, which have governments who subsidize certain agricultural products, which destabilizes tariffs and then the products are being dumped into Malawi. That is competition on an uneven playing field. For instance, a certain country may subsidize or guarantee minimum prices for a particular product, which Malawi would not subsidize, so local companies would have a tough time competing on that level.
What we are seeing as a result of regional integration are countries which are competing for investment from Asia, the US or Europe. Why should I invest in a company in Malawi instead of another one, in Zambia for example?
People see the land lock issue in Malawi as a disadvantage, but regionally it is actually an advantage, because from Malawi you actually have greater and easier access to other countries in the region than you would from Zambia, Botswana, Zimbabwe, Tanzania or Mozambique, for instance. If you are looking at agro-processing where you are buying agricultural products in Malawi then exporting them, it is actually more efficient to do this from Malawi from a logistics point of view than from other countries. When you are looking at bringing raw materials or processed products into Malawi from further afield than Southern Africa then, yes, the land lock issue is more of a problem. But even that is not such an issue. All the companies using or importing the same products would have the added transportation costs. So for servicing the local Malawi market all the companies would have the same relative disadvantage.
However, I see the potential for growth in Malawi in agro-processing for export, both regionally and internationally. Nowadays it is actually quite efficient to transport goods from Malawi to a port. We can actually send agricultural products to India more competitively from Malawi than they can from say Kenya, even though we are a landlocked country and they are not. So it really depends on the sector you are looking at and the market you want to serve.
People might see the underdevelopment in Malawi as a disadvantage, but for every problem there is a flip side as well. I actually see the underdevelopment in Malawi as an advantage, an underutilized potential. If you locate an agro-processing company in Zambia, to take your example, there are probably another five or ten companies which are already working there and trying to service the local market or certain limited regional markets which they have access to. In comparison, in Malawi there are probably two or three competitors in that particular market so the local competition is less. You still have access to all countries, and if you manage it well even certain logistical problems can be overcome, which could actually prove to be a big competitive advantage if other companies cannot overcome such logistical barriers.
With the advent of the global village, Malawi will certainly establish itself as a center for new business opportunities. How are you preparing for competition entering the market? Do you have a strategy for the future to make sure that you continue to have a leading role?
We normally look ten years in advance, and this is broken up into two separate segments. Because of the environment that we operate in, it is an economic and a social environment, which is in flux. It may not be as static as a developed country, but we want to position our group of companies to continue to be leaders in the fields in which we are involved. First of all in Malawi (which I think we already are) then regionally and beyond the region internationally.
One of the ways which we have been doing this is developing links with similar innovative and fluid companies in the region. We will first establish ourselves as leaders in Malawi, and then we will move into a regional neighbour, for example Zimbabwe, and find similar companies with whom we can establish links. Then, once we are established regionally, our company and our partners will look further afield, so what we are doing is linking away from Malawi to the global village by picking leading companies and building strategic alliances.
I am very optimistic about the future in terms of the linkages and partnerships that we are creating. The buying power in this part of the world will experience high growth rates, perhaps not in dollar terms but certainly in growth rate potential. For people to catch up with the rest of the world they have to increase their consumption so they will need access to a market which they do not have yet - we have the links. Meanwhile through our links we also have access to more developed markets in which we might not have the size or financial clout to compete on a one-to-one basis.
| For example, with Rice Milling Company (Pvt.) Limited we are the leading rice company in Malawi with about 70 per cent of the market and we are the leading exporters of Malawi rice in the region, but we also have a shareholder based in the UK called Veetee Rice who have mills in the UK, India and Pakistan. They are the leading rice suppliers in England, but they also have offices around the world. If we were looking regionally, we would be more involved as Rice Milling Company (Pvt.) Limited. If we were looking further afield, Veetee Rice would be more involved, and with these links we would be in a position to move forward and Veetee Rice would be able to open markets to us which we might not normally have had access to and vice versa.
We are also firm believers that, irrespective of the world becoming smaller and advances in technology, nothing really beats a personal touch. Perhaps this is derived from the family business, but we still feel that it is important to have people who have access to or are based in countries which you are targeting.
If we were to come back in three years, where do you think the companies would be?
All the companies in food and agricultural side of the group have achieved phenomenal growth in terms of turnover and volumes since the start of their operations. Our target is such that in the next three years, all the companies which are on the food side must at least double in size, in assets, in turnover and in product range from where they are today.
We will be the major basic food commodity supplier in Malawi in pre-packs and bulk, and the major exporter of agricultural commodities from Malawi.
Do you have to lobby the government in order to affect change and improve private sector policies?
Unfortunately, there is not a lot of interaction. However, to be fair to the various government bodies, the will is there and the ideas are there. In principle they are looking in the right direction but the implementation does not always work.
What we are suggesting is that many of the things, which the government is trying to do, should be done in partnership with the private sector. For example, they are trying to increase farmer inputs, and many farmers cannot afford basic fertilizer or seeds. Rather than the government doing it alone, private industry could monitor it, implement it and run it with the guidance or within the policy framework of the government. In this way, both sectors are going in the same direction, and it would certainly lead to increased yields, increased volumes, as well as guaranteeing stable markets for farmers. Right now they have been pushing maize, but now there is a surplus and farmers are not receiving good prices, whereas if the government had done this in conjunction with private industry, as volumes were increasing the private sector would start looking to the rest of the world to sell the commodity, and the focus could have shifted away from maize to other agricultural commodities.
In order to achieve this coordination we would like to see a forum of some sort where appropriate or interested stakeholders work together. Yet at the moment there is no such forum and we need to start a dialogue to ensure that the policies and decisions made by government are in line with what industry wants, which is not always the case.
In this case, do you believe that the future of the agricultural sector is in the hands of the private sector?
Yes, because unless you are working in a free market environment competition will remain unfair. If companies or parastatals are being subsidized, or underwritten by the government, they will always be inefficient but will have no incentive to improve. Therefore, the decisions that are taken within these companies are not always of commercial sense, but it doesn’t matter to them because they will get bailed out anyway. Unfortunately, private enterprise does not have this luxury. To develop Malawi a true free market must be promoted and companies should be allowed to compete on even terms.
You have mentioned that you were looking for joint ventures or partnerhips…
We are in the fortunate position that we are continually being approached by companies around the world, either for joint ventures or alliances, and we are always open to alliances that would further improve our competitive position and market position. This is not selling part of the company, but it is gaining a partner. We have absolutely no need whatsoever to sell any part of our company but if there is benefit from us gaining a partner and vice-versa, we will definitely look at it. Within the various companies within the group, half of them have strategic partners or shareholders.
How have you been contacted for these partnerships – through the government or through direct contacts?
Because of our alliance with companies outside Malawi, quite a few of them approach us directly. I might not directly know companies dealing in rice in Dubai, for example, but Veetee Rice for example would have a contact there and would know companies which are interested in investing in Africa, so our strategic partners and alliances provide an information flow as well a strategic alliance.
Having said that, we do work quite a bit with MIPA, the Malawi Investment Promotion Agency, and we have had a number of inquiries come through them. Yet we are not interested in simply having a sales office somewhere else in the world and we are very particular with whom we will look at. The philosophy must be the same, the motivation must be the same, and there has to be a tangible benefit to both sides and strengths that can be drawn one from both sides. If for example a company is interested in processing lentils into baby food because of the nutritional value of lentils, we might be interested.
Do you have a marketing strategy, nationally and internationally?
Yes and no. Nationally we certainly do – most people in Malawi have not only heard of our brands but regularly purchase them. That is done not so much through direct advertising but more through the services which we provide. In Malawi there is a fairly limited access to the media, and some of the marketing, which might apply to the rest of the world, will not necessarily apply here. There is also a large illiterate population; so clever advertising schemes do not work.
Discounts work, so that is a way to reach out to a farmer in the middle of the bush, and we make sure that our cost basis is lower than everyone else’s. Having said this, we also do some direct advertising, mainly in urban areas.
Internationally, through our strategic alliances we are represented at trade fairs around the world and are promoted by these partners both directly and indirectly. We use our alliances and partnerships to promote our company and products internationally. Also, a large amount of our trade is business to business so direct consumer marketing is not appropriate.
Would the situation change if the international market became more competitive?
Yes, it would, but being a family organization we find that it is very important to preserve the reputation of the name of the family. Companies from around the world would sometimes deal with us because we have a good reputation within Malawi and internationally and we obtain a good deal of business based on our history and integrity. Most products that we deal with are bulk commodities, so advertising on an FMCG basis is not as important internationally.
As far as regional integration of SADC countries and Comesa, what benefit will this have on the agricultural sector in Malawi?
The immediate effect is access to a larger market where certain alternative products might not be grown. For instance, Zambia, Zimbabwe, Botswana and South Africa – none of these countries grow rice, so the benefit for Malawi in non-traditional crops is huge because you are not competing with a product that is locally grown in other SADC and Comesa countries, you are competing with a product which has to be imported from halfway across the world.
On the non-agricultural side, I think Malawi is at a disadvantage because economies of scale, in other parts of the world have a greater benefit. However, in terms of movement of goods I think it could be an advantage. If you are a dynamic and fluid company, you can make things work to your advantage. If you are good at what you do, if you care about what you do and if you look ahead far enough, I think a company in Malawi can be large, strong and well positioned to expand abroad. So the advantages for agricultural and non-agricultural sectors outweigh the disadvantages.
Could you tell us a little bit about your background?
First, I will tell you a little more about the background of the company. It was started by my father, Zainuddin Mukadam, who had to support his family after my grandfather passed away. He was working in a lawyer’s office, and while he was there a bankruptcy went through and there were two nail machines for sale. Although he could not afford them at first, he managed to save and borrow enough money to buy these two machines. He then set them up in his back yard, and that is basically how he started over 40 years ago.
Much of the growth in the company is certainly a result of his motivation and his foresight. Now that a second and third generation is coming in, we are still very aware of the humble beginnings of the company and we see our role as continuing his legacy. We see this company as being in our hands only temporarily; preserving it, building it up and growing it for future generations. We have also learned that what has taken 40 years to build can take a few days to lose.
My own personal background is I studied a BSc in Business Administration at the University of Bath, then an MSc Certificate in International Business at the Rotterdam School of Management. During these studies I obtained work experience with Price Waterhouse in London, Ford Motor Company in Basildon and CarnaudMetalbox in Harare. After graduating I worked for Andersen Consulting in London. Finally, on leaving Andersen Consulting I obtained a Masters in Business Administration at the Graduate School of Business at the University of Cape Town. I then returned to Malawi in 1995 to join the family business.
I may be the founder’s son, but it does not mean that I had an automatic entitlement to a senior position within the company. I had to earn the position and the respect of the people with whom I work. That is one of the reasons why all my siblings have also acquired work experience outside Malawi – even when we joined the company it was not an automatic.
What would be your final message to our readers?
Do not see Africa as a backwater full of destitution and problems, see it as a potential untapped market - the potential is there. If you are focused or geared to exceeding the expectations of your stakeholders, your staff or even yourself, then this is the place to come to. If you take satisfaction in meeting or exceeding a challenge, then this is the place to come to. If you see opportunities where others see problems, then this is the place to come to. ´The African Lion has the potential to take over from the Asian Tiger´.
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Commodity Processors (Pvt.) Ltd