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Obsolete plant and equipment contributed to low uptake of ZFC products during the 2014-15 season

FERTILISER manufacturer ZFC Limited will invest $8 million in the next five years towards refurbishments and upgrading of plant equipment as the company steps up efforts to meet local fertiliser demand. The company experienced a low uptake of its products during the 2014-15 season due to lack of purchasing power from farmers as well as the existence of obsolete plant equipment.

In 2014 the market demand for fertiliser was 300 000 tonnes but ZFC only managed to provide for 100 000 tonnes.

ZFC managing director Dr Richard Dafana told Industry and Commerce Minister Mike Bimha during a tour of Zimphos yesterday that the company’s equipment was now old and could not compete with South African competitors.

“Our capital expenditure for the next five years will be $8 million and we are going to raise the money mainly from our operations considering that our shareholder has not yet secured a strategic partner for us. The local fertiliser industry has also been affected by the availability of duty-free fertiliser imports mostly from South Africa and Zambia which have flooded the market,” said Dr Dafana.

He said the equipment needs overhaul and the fact that the company is on the sanctions list it has become difficult for them to secure lines of credit from international financial institutions.

Due to the company’s sanctions status about $1,8 million in the company’s account was intercepted by the Office of Foreign Assets Control. Currently, the company owes about $7 million to its creditors while $6 million of the overall debt is still in the people and this forced the company to adopt a strictly cash business stance.

In addition to the company’s woes, a number of farmers struggled to buy inputs for the 2014-15 summer cropping season after the Grain Marketing Board failed to pay for last season’s deliveries while a price hike in inputs also made life difficult for them.

“The company’s capacity for last year was 31 percent against that of South African competitors of 91 percent and the company’s gross margin is currently sitting at 13 percent. Fertiliser business is high volume thin margin business so there is need for investment in new equipment to increase volumes on condition the market would be consistent,” said Dr Dafana.

“Our country has enough capacity to satisfy the local demand and we have approached Government advocating for 25 percent tariff on imported fertilisers to create a level playing field.” – BH24.