Entrepreneurship Zone: 03 January 2021 :: Zambian soya bean trader expands business by manufacturing edible oil

Mon Jan 3 06:54:24 CAT 2022

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Entrepreneurship Zone: 03 January 2021 :: Zambian soya bean trader expands business by manufacturing edible oil

 <http://www.zitf.co.zw/> 

More than a decade ago, Sarah Ngwenya came across collective farms run by women while working as a journalist in Ethiopia. Inspired by what she saw in the agricultural sector, the entrepreneur resigned from her job and returned to Zambia to set up her own business.

In 2011, Ngwenya founded Kalomo Grain Marketing Limited (KGML), based in the town of Mumbwa, which operates as a grain producing, processing and trading company. The first phase of the business was trading soya beans procured from around 3,500 female farmers in six different smallholder clusters across the country.

In the beginning, the lack of funds kept the business constrained to only commodity trading. “We were trading for about five years and that is how we raised the capital to buy land and a processing plant for edible oil products,” she says.

Adding value

The production of edible oil results in far greater turnover than simply selling soya beans owing to the added value, according to Ngwenya. Supreme Oil was the soya bean-based edible oil brand that was created after this realisation. It is currently being sold in Zambia where it is mainly used as a cooking ingredient.

Along with the capital generated from the first five years of commodity trading, KGML was able to build processing plants and expand operations with the help of two grants. The first was a €20,000 grant from the UK Department for International Development to help boost the use and effectiveness of Zambia’s local variety of soya bean seed. The second was a $100,000 grant from the US African Development Foundation (USADF) in 2020 to build a 25KW solar-powered oil processing plant.

“We are situated around 40 km from the main grid, so we had to look at a way of getting regular electricity supply,” explains Ngwenya. This has helped push KGML’s production to 20 tonnes of soya beans a month.

Ramping up capacity

However, Ngwenya says that because of the current capacity limitations, there is often an excess of soya beans that cannot be processed. As a result, the entrepreneur has outsourced part of KGML’s processing to other local firms. The company is seeking to finance a new processing plant with the capacity to produce up to 60 tonnes of raw material per month.

“It will help the company. For instance, right now we have secured interest from a company in the Democratic Republic of Congo (DRC) but we won’t be able to supply the full amount they require. We are looking for partners or donors; the plant is not on sale for less than $300,000.”

Ngwenya recently found a vendor in China that will give her a better price than if she bought the processing plant from Europe or North America. She must also factor in paying costly fees to bring the equipment into Zambia.

Export capabilities

The deal with a company in the DRC – to export 275,000 litres of edible oil – was the result of a trade mission to Zambia’s neighbour which Ngwenya joined. Despite initially being able to supply just 34,000 litres owing to capacity constraints, Ngwenya says the DRC will be a key market for Supreme Oil in the future.

The company is also looking at establishing operations in Malawi after KGML was approached by USADF to set up a similar renewable-energy powered processing plant in the neighbouring country. “We received funding to replicate this project and chose Malawi because it is easy in terms of language and even their local dialects, which we can understand,” she says.

KGML is hoping to export to the US after taking part in another trade mission to the world’s largest economy. The demand for organic and unblended edible oil is very big in the US, presenting a sizeable opportunity for the growing company.

“From the numbers we saw, we would make a very good amount of money exporting to the US.” However, Ngwenya says the business must first increase the quality of the oil to meet international standards.

Diversification strategies

A by-product of making soya bean oil is ‘cake’ that has several uses. This provides KGML with another source of income, with edible oils accounting for only around 40% of the business.

The cake can be turned into porridge and the company currently sells it in dry form to NGOs and hospitals. It can also be used as animal and fish food.-Howwemadeitinafrica

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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