In conversation with
Managing Director |
FDI Spotlight: What has been your personal journey with Bolux Group so far?
Christo Ellis: I joined Bolux Group in 2015 when Seaboard Overseas and Trading Group, a global agribusiness company focusing on the African and South American markets, made a substantial investment in the company.
The investment has really changed the environment of the company. It allowed Bolux Group to upgrade our production facilities and secure a wheat mill, which became fully operational in May of 2016. We are now in the consolidation phase and need to start showing returns on the investment. From both a shareholder and management perspective, we would like to grow the company substantially. We have set targets for where we want to be by 2020.
Can you expand on some of these targets and the potential of achieving them by 2020?
Christo Ellis: Unfortunately, we are somewhat hesitant to execute in order to reach these targets, specifically due to the intention by government to remove the import levy on wheaten flour products. In 2003, the then Minister of Trade and Industry made a decision to protect the milling industry in Botswana by imposing a 15 percent import levy on wheaten flour imports. However, since the new Minister came into office, a decision has been made to phase the levy out over the next 10 years. This decision was made without the consultation of stakeholders in the industry such as ourselves, which is important because we as the stakeholders do not understand why that decision was made.
Botswana is a landlocked country, which is a very important factor to consider when making or taking away laws regarding importation and exporting. Opportunities for Botswana regarding importing and exporting are very limited. Years ago the country was in a very beneficial position to leverage off of mining diamonds; the Botswana government understands that diamonds will not last forever, which begs the question: what else is there to create jobs and create sustainable and lucrative industries?
From our perspective the answer to that question is replacing imports with local manufacturing, if the quality and the price can remain the same. That will create jobs. However, I also very strongly believe that, for the time being, we should not focus on creating jobs – we should instead be focused on protecting the jobs we have.
I believe that this is where South Africa is going wrong as well. They talk a lot about creating jobs, but instead every month they are losing a substantial amount of jobs. A platform should be created – in both South Africa and Botswana – where business and enterprise can operate in a risk-free environment.
The South African milling industry has over time invested in downstream value adding like plant bakeries, but locally plant bakeries are reserved for local citizens which makes it very difficult for the local miller to invest in value adding downstream industries.
We see ourselves as, and would want to be largely known for, creating jobs in Botswana. Restrictions such as the above mentioned blocking of the value chain integration makes us less competitive, especially next to our neighbors, South Africa. The fact is that South Africa is vastly ahead of us in terms of getting a completed product out; what they mill in two weeks is equivalent to what the local demand is for a year. Furthermore the transport and logistics infrastructure is also a lot more sophisticated and efficient than ours. Therefore, if they were to dump some of their finished product in Botswana they would barely feel it. We, however, would feel the implications deeply.
At the end of the day, this is an industry of vital national importance for job creation and food security. In terms of jobs, we supply about 450 people mainly from the local villages with jobs. That is the direct impact. The indirect impact is of course much greater, because Botswana does not have a large population. Botswana’s milling industry directly provides jobs to about 1800 people.
We are also passionate about the belief that we need to manufacture locally – it is somewhat crucial from our perspective. South African exporters and importers are generally only interested in the developed market of Gaborone. However, you need to look at the rural areas throughout the rest of the country. If the milling industry here were to be squeezed out by international players dumping the market, it could have serious implications of food security for the population outside of the capital city. Therefore, we have asked the Minister what is being done to ensure national food security if the milling industry in Botswana dies.
This is now a very real situation and is no longer just a hypothetical question, which is terrifying. However, we do not believe that it is too late and that by strengthening our relationship with government, we can be part of the solution to this problem.
Could a greater emphasis on Intra-African trade help improve economies of scale for local Botswana manufacturers?
Christo Ellis: Yes and no, as even though Botswana is in a prime location to trade with the SADC region, some of the tariffs as well as legislative and cultural barriers to enter can make regional trade quite restrictive.
For Botswana, Zimbabwe is the perfect market and trade partner simply due to its proximity and potential market size. However, from an economical point of view, we find it extremely difficult to do business with them due to their political and economic environment. Currently Bolux provides Zimbabwe and Zambia with pasta mainly, but as I mentioned liquidity and also unreliability of client payments makes finding the correct partner in these markets even more important than normal.
From the perspective of an international investor, where do you see the most stable and conducive destination for investment in the SADC region and in Africa?
Christo Ellis: Firstly, I think you need to look at the risk profile of a country, as well as an investor.
If you as an investor have a high risk profile, the opportunity for return is definitely there across the whole continent. However, if you are a conservative investor with high governance principles and a low risk profile, it is very difficult to invest in many of the African countries. Mozambique is a good example of such a country with great potential for those investors with a high-risk profile, which I have seen first-hand having spent time there.
We, Bolux and Seaboard, have been very bullish about remaining in Botswana. This is mainly due to investment opportunities and the country being a safer haven from an investment and tax point of view. I have spent some time in Namibia and even though some things are changing, what they have achieved in the agricultural sector is massive. The Namibian agribusiness sector can be a great example for Botswana as well as in growing the local agribusiness.
As an industry we really want to support investment into Botswanas agricultural environment.
When you look at Botswana, there is the need for investment into the agricultural sector, but it is also important to acknowledge that the tourism sector needs an investment injection as well. I strongly believe that the tourism sector can capitalise on its natural beauty, in order to attract more foreign investors and foreign direct investment.
What message do you want to communicate to government and to investors?
Christo Ellis: A few years ago the Botswana Milling Association was formed in order for businesses and key stakeholders such as ourselves to support each other and address issues of national importance within our industry in a unified manner. The Association was also formed to speak with the Botswana government in a productive and healthy way that will produce results that benefit both sides.
Our overarching message to government has always been that we are here to grow the industry, the country and to create jobs. The government needs to provide us with a stable platform to enable this and create a conducive environment in terms of policies for us to sustainably grow this industry.