The not-so-small
“Small Milling” sector

Whether explicitly or implicitly implied,
Small millers have often (unfairly) been deemed as unsophisticated cowboys with medieval milling equipment; who employ tactics all-but-short of guerrilla warfare
to push their way into the South African market place. This perception
is now as long in the tooth as the
art of milling itself.

Attitudes however, are changing thanks to new technology, support and business practices in the burgeoning small milling sectors. Far from replacing traditional millers; small millers are actively contributing to a new, competitive and open milling industry.
       The role that deregulation has played in South African agro industries is crucial to understanding the emergence of this new class of miller. As this has already received coverage in the ‘Institutes and their Role’ article in this issue, I will not go too in-depth into this subject.
Suffice to say that some of the most relevant aspects of deregulation in relation to small millers centre around the fact that prior to deregulation, the Government administered the wheat, milling and baking sectors.
       This resulted in restricted registration of millers and bakers during the period of controlled marketing. This was evident in terms of acquiring the licences needed to operate as a milling enterprise and also in obtaining raw materials. For example, the bulk of white maize (used to produce end products for human consumption such as Super maize meal) was largely reserved for use of the industrial mills.
       The general environment prior to 1997 was technically and volume driven as opposed to commercially competitive and quality driven. Supply chain management was generally inwardly focused due to being heavily influenced by Government control. The industry communication system, as a result of this centralised structure, was slow and reactive. This is especially true when one compares the relatively proactive and fast delivery today by institutes such as the National Agricultural Marketing Council (NAMC).
       The value, or contribution, of small millers to the industry is at best an estimate, and at worst, impossible to pin down. Many millers in this country fall under subsistence categories and would thus not contribute to monthly cereal production tallies done by SAGIS (South African Grain Information Services). Indeed, many of the rural mills would not be in contact with modern communication lines such as internet, or even regular postal systems.
Similarly, many of the small to medium entrepreneurial millers do not feel the need to acquire membership at organisations such as the NCM (National Chamber of Milling). This is despite the fact that the chamber is open to all within this field, and not just the industrial scale millers.
To give an example of a possible estimation that can be used to calculate volumes produced by small millers, one can compare the annual figures of SAGIS and NCM. Using the figures for white maize for the year 2008 – 2009, the NCM’s figures(representative of their members) reflected a total of 2, 731 795 tons.
       The total of SAGIS for the same time period was approximately 3.47 million tons. It could be presumed that much of the difference of approximately 738, 000 tons is made up of the contributions of small millers.
       However, this still does not take into account many of the small miller’s figures, with some estimating that the chamber represents only 60% of South Africa’s maize millers. (This will also change in the future due to Premier Foods’ recent resignation).
       The phrase ‘small milling’ traditionally brings to mind informal milling operations consisting of either stone or hammer mills in the formal sector; and what is commonly referred to as “bush mills” in the informal sector. “Bush Mills” are normally used in the subsistence agriculture sectors and can literally refer to anything used to mill crops/cereals into smaller particles. What is startling is the level of technology in small-medium milling plants that has been brought about by the freedom to market entry offered by deregulation.
       A fantastic example of this is a company called Kromdraai’s Best Milling, whose ‘Super-Sure’ house brand flour has gone to national levels. In addition to supplying a large selection of bakeries, Kromdraai also supplies some the country’s largest retail chains and wholesalers.
The use of a PeriTec wheat roller milling system supplied by Johannesburg based Techmach Technologies enables Super-Sure flour to offer customers advantages such as brighter flour, increased loaf volume, improved nutrition and a longer shelf life. Kromdraai is also the biggest employer in the Mafube district in the FreeState.
       For the purpose of this article, we will define ‘small’ as any milling capacity less than 5 tons per hour. Development Miller is another category that often, but not always, fits under the small milling reference. This refers to the growing numbers of previously disadvantaged individuals engaging in the milling industry; either on a subsistence basis or on a business level (such as Hatnoon Milling in Johannesburg).
       Traditional or Industrial Millers are defined as large scale, high volume milling companies such as Premier Foods, Pioneer Foods, Foodcorp and Tiger Brands. Independent Millers include medium to large milling companies such as Godrich Flour Mills or Lesotho Milling.
There have been many external/greater environment influences that have also positively contributed to the burgeoning small milling sector. Probably most significant is the ever-increasing logistics costs, causing businesses to source and sell products locally wherever possible.
       The centralised milling system of the past did not take soaring transport costs into its future considerations. Small – Medium mills that can produce a product quality on par with that of traditional mills have the capacity to simultaneously lower production costs and dramatically raise profit margins, just by being placed in close proximity to the grain supply.
       This point is further enforced in the Government’s 2010/11 – 2012/13 Industrial Policy Action Plan which states: “The maize milling sector is highly concentrated and domestic prices appear to be subject to anti-competitive practices. There is significant potential for the development of a class of small-scale millers which could sustainably reduce the current high cost of basic food products”
       Other contributing factors to growth in the small milling categories include the cereal surplus in South Africa. This has the obvious result of increasing opportunities within the agro processing sectors. (The SADC Food Security Assessment for the 2008/2009 marketing year indicated a total cereal surplus for South Africa of 1.60 million tons).
       In addition, the distressed financial economy has resulted in many lower socio-economic groups moving away from luxury items and back towards staples such as maize meal. Interestingly, the reverse is true of the higher socio-economic groups, who require increasing varieties of specialised milled products for luxury niche food items such as Italian/Greek breads. Small-medium, high technology milling plants are ideal for the production run size required to produce this.
       Implying that small millers will eventually, (or even desire) to take over the function of the traditional millers is not by any means the intention of this article. On the contrary. The multitudes of milling markets available, as well as the emerging export markets, leave more than enough room for all of the players (and then some) to operate within.
       Similarly, just as the essential point behind a free market is competition; competition itself generates growth and new opportunities. There is a definite place for the stone mills, hammer mills, small roller mills and large roller mills alike; just as there is a purpose within the market place for the products produced from each.
       The milling industry should strive to reflect our colourful multicultural country. Just as the term ‘ubuntu’ refers to a sense of belonging to the greater whole, it is also connected to the idea of an African Renaissance.
       Instead of taking over the whole, players in the milling industry should embrace the idea that they are a contributing part of the greater industry and actively participate in the growth of what will one day be referred to as the ‘new milling renaissance’.

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