The first small-scale mill is situated in Riverhorse Valley in Durban and has a milling capacity of 2-3 tons per hour. The mill, commissioned on 6 December 2012, is expected to start producing a unique variant of Supreme super white maize by February 2013. It will also be the regional production centre for smaller pack sizes into the retail trade.
"Kuvusa Mills' objective is to establish smaller capacity plants in rural areas that are able to produce a premium quality product at a reduced cost," confirms Sé Higgins, MD of African Micro Mills and co-founder of Kuvusa Mills.
"Historically the smaller independent millers have faced restrictive circumstances, such as technology and knowledge-share deficits, limited training and finance options and escalating logistics costs. Ultimately, this means that they have not been able to thrive in a market traditionally monopolised by large-scale milling operations."
Established in KwaZulu Natal in 2004, African Micro Mills is an organisation dedicated to researching and implementing intelligent milling solutions in developing markets. It created a mentoring company, called African Mills Mentors, which is responsible for the skills development and training of those employed at Kuvusa Mills.
"At this stage, the company plans to open another two to three more small-scale mills in rural locations in 2013. By establishing these mills in rural areas, we will be negating the rising cost of logistics by creating a parallel track of decentralised facilities wherein rural areas are incorporated into the mainstream value chain. In addition to job creation and simultaneous provision of a route-to-market for emerging farmers, these commercially viable projects have important implications for lowering maize meal prices in rural areas by as much as 20%," explains Higgins.
Rural, poor consumers not only earn significantly less, but are also required to pay substantially more for basic food staples. Of the five food items most widely consumed by poor consumers, maize is the most common - approximately 532 g per person a day of cooked maize. According to the latest South African quarterly Food Price Monitor Report, produced by the National Agricultural Marketing Council, in July 2012 rural consumers paid R7.33 more than urban consumers for 5 kg of maize meal compared to July 2011. This increase is in addition to the 16.2% price escalation experienced countrywide on the same product from July 2011 to July 2012.
Davies says that the role of his department is to transform the milling industry systemically to reduce the space and likelihood of anti-competitive activities that may take place in the future. "This is the function of IPAP and the small-scale milling sector was prioritised for intervention in 2010/11. Our policy imperative was clear from the outset, the dti needed to introduce competition into the milling sector not only for competition reasons, important as these are, but also to spur innovation in the sector and to encourage industry incumbents to re-think their business models. At the core though, the strategic intent of the programme is to reduce the cost of a basic food product upon which millions of South Africans depend."
He added that the agricultural and milling sectors play an important role in reflecting poverty and in reducing or increasing its incidence. "Given that maize-meal constitutes the staple food of poor South Africans, its price and the volatility thereof can easily contribute to poverty alleviation or, as has been the recent trend, can substantially worsen the incidence of poverty," he concludes.
"The rollout of these mills is of paramount importance to the country, its economy and its social wellbeing and we are therefore delighted that the dti supports this plan. The IsiZulu word 'vusa' means to awaken, rebuild, renew or revive. Kuvusa is the present tense version of vusa and thus can be roughly translated to mean 'it awakens, rebuilds, renews, enlivens or revives' - which is exactly what we plan to do in this industry," ends Higgins.
Up to 37% of the consumer price of maize-meal is accounted for by transport and logistics costs. This arises from the idiosyncratic location and highly concentrated nature of South Africa's maize milling capacity. Maize is grown in rural areas and transported to urban and peri-urban areas for milling before being transported back to rural consumers. As fuel prices have risen, these costs have come to account for an increasingly large share of milling costs.
While micro or small-scale maize mills are competitive by allowing milling to take place closer to the point of maize farming, thereby avoiding long distance transport, these mills have in the past produced only a moderate quality maize-meal. However, Kuvusa Mills, with support from the dti, has secured one of the first market-leading small-scale maize mills capable of producing high-quality super white maize-meal, much loved by South African consumers.
As part of Kuvusa Mills and the dti's commitment to food security and poverty alleviation, maize-meal produced at these mills will be marketed at prices below prevailing market rates. In so doing it will introduce competition into a highly concentrated sector, which has an unfortunate history of uncompetitive practices that have directly affected poor consumers' ability to feed themselves and their families.
