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New milling company enters the market

With the support of Absa, Massmart

JOHANNESBURG – The first black player to enter the milling industry, Lethabo Milling has been given R9.8 million by Absa bank and retail group Massmart to buy a mill in Ventersburg, Free Sate.

As part of the deal, Lethabo will produce 10 000 tons (830 tons a month) of Massmart’s private label Econo Super Maize Meal, which will be on the shelves by the end of July.

“We believe we have entered into a mutually beneficial partnership with Lethabo and Absa that will result in black representation in a key industry, create jobs and also put our Econo house brand on the shelves,” Massmart Supplier Development executive, Mncane Mthunzi told media at the launch of Lethabo Milling on Friday.

But this relationship is not exclusive. “We want Lethabo to sell to our competitors,” Mthunzi emphasised.

Lethabo is a participant in the Massmart Supplier Development Programme, which helps develop South African suppliers, particularly small-to medium-sized enterprises (SME) that are black-owned or locally manufactured.

There are more than 193 suppliers in different industries currently participating in the programme. Local company Ikusasa Green began manufacturing cooler boxes in the Eastern Cape last month for Massmart’s private label, Camp Master.

Mthunzi emphasised that the Supplier Development Programme was not about corporate social investment. He said the commercial viability of projects benefiting from the programme was crucial, as Massmart wanted to build sustainable businesses.

The Lethabo Milling deal is made up of an R8.2 million loan provided by Absa Enterprise Development. Just over half of this will go towards purchasing the mill and equipment, with the rest being used as working capital.

Massmart is acting as a guarantor for 50% of the loan and has issued an additional R1.6 million grant to Lethabo to upgrade the mill facilities and implement a new packaging line.

Massmart’s guarantee will kick in if Lethabo cannot service the loan.

A rival to larger peers

Lethabo Milling CEO, Xolani Ndzaba said that the quality of the product, pricing it competitively and the customer service element would position Lethabo to compete with the industry’s larger players.

He said Lethabo would strive for commercial performance, organisational efficiency and sustainable social development, particularly in the Ventersburg community.

“We will also be milling our own Lethabo brand and we hope to distribute our products across the country in the coming years. With our little contribution, we will help to alleviate the job creation problem,” Ndzaba said, noting that Lethabo would create 40 jobs within its first six months of operation.

Ndzaba is one of 48 South African entrepreneurs who were selected by Massmart to participate in a 12-month business management programme, which began earlier this year.

Head of Business Banking at Barclays Africa, Roy Ross said that Absa wanted to continue playing a role in contributing to the growth of entrepreneurs and SMEs in South Africa.

In addition to funding, Absa provides market access through its Procurement Portal to SMEs. There are 300 000 buyers and 20 000 suppliers in this portal and Ross said they would continue to connect suppliers and buyers.

Lethabo is 100% owned by Ndzaba, his wife Thembi and two of their business partners. Absa and Massmart do not hold any stake in the business.

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