Absa, Massmart deal sees new black player enter milling industry
Lethabo Milling (Pty) Ltd, a 100% black owned business, is receiving considerable support from retail group Massmart and Absa bank. This partnership deal that will see the milling company receive funding to the tune of R9.8 million.
Lethabo, a participant of the Massmart Supplier Development Programme, is to acquire a mill in Ventersburg, Free State with the funds. As part of the deal, Lethabo is expected to supply 10 000 tons of Massmart’s private label Econo Super Maize Meal.
The funds are to also be used by Lethabo to upgrade its facilities and to put new packaging into place.
The R9.8 million deal is made up of a R8.2 million loan provided by Absa Enterprise Development. Massmart is contributing a R1.6 million grant as well as acting as a guarantor for 50% of the loan.
“We have found our first black supplier”
Speaking at the launch of Lethabo on Friday, Mncane Mthunzi, supplier development executive at Massmart said the deal was a mutually beneficial one for all parties involved and would result in black representation in the milling industry and job creation.
“What I like about today is not just because we have found a supplier but that we have managed to introduce the first black player in the milling industry,” he said.
Mthunzi said the partnership with Absa marks an important shift in focus for Massmart, “We recognise that reviving key industries and developing much needed skills continues to be an important mandate in the South African context.”
The Massmart’s supplier programme continues to gain traction since its launch in 2011. There are currently 93 suppliers in various industries participating in the programme.
Lethabo is not the only SME to benefit from Massmart, the retail group has assisted other small businesses through its Supplier Development Participant programme. Last month, the programme has also successfully launched a manufacturing project in Stutterheim, Eastern Cape with Ikusasa Green, a company which is manufacturing cooler boxes for Massmart’s private label, Camp Master. SMEs such as Bio Lotion, and Xchem Chemicals have benefited through the supplier development programme.
New player in the milling industry
Xolani Ndzaba, CEO at Lethabo Milling said the deal had been completed without any administrative barriers that most small businesses face in securing finance.
“It is difficult to obtain finance for these kinds of projects without production commitments from big companies such as Massmart. We will also be milling our own Lethabo brand and we hope to distribute our products across the country in the coming years,” he said.
Ndzaba together with his business partners, Kenneth and Prince Siluma originally approached Massmart with their product in 2010 which was tested and found to be satisfactory by the retail giant. Two years later however, the business was not growing and was facing challenges with funding.
They approached Massmart for the second time in June 2012 and later in the year, Ndzaba was one of the 48 entrepreneurs chosen to participate in the Massmart Supplier Development Fund, a 12-month business management programme.
Ndzaba said Lethabo Milling is set up for greater heights following the injection of the fund by Massmart and Absa.
“We’re a new player in the milling industry, however, we’re well positioned in terms of price, customer service and product quality.
“We are determined to succeed, we started back in 2010 and its only today that we realised our dream with the help of Massmart through its partnership with Absa. We got into this industry knowing very well it’s not for sissies” Ndzaba said.
“SMEs are close to our hearts”
Roy Ross, head of business banking Barclays Africa, said Absa recognises the importance of the SME sector as a key driver of economic growth.
“SMEs are close to our hearts. Through this partnership, we will play our role as funders.
“We want to make sure that we’re just not lending money to people, but that we’re helping them in the broader capability of financial management, human resource, marketing,” Ross said.
Ross said Absa’s involvement was just a part of the bank’s greater entrepreneurship efforts.
“As the financial partner of the Massmart Supplier Development programme, Absa will serve the needs of the SME suppliers involved by making funding available to them. In addition to this, we will provide market access and business linkages through our Procurement Portal and provide non-financial support through our network of Absa Centres of Entrepreneurship located across the country”.