Xolani Ndzaba: Milling the future

2014-06-15 15:00

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Even though it seems Xolani Ndzaba, the CEO of Lethabo Milling, struck gold when he closed a R9.2?million funding deal from Absa and Massmart, he said it took four years of frustration to get to this point.

Ndzaba, who trained as a production manager, said he had always wanted to be in the manufacturing business and has worked in the fast-moving consumer goods industry for more than 25 years at companies including SAB, United National Breweries, Tiger Brands and Papa Super Maize Meal.

But he knew he always wanted to have his own business. Even before he got a job, he had sold fruit, hygiene products and stockings.

In 2011, Ndzaba decided to abandon full-time employment to go into business with his wife and two friends, brothers Kenneth and Prince Siluma. They started Lethabo Milling with the aim of manufacturing maize meal, but struggled with funding to produce it on a mass scale.

“The reason we chose to go into this business, particularly food, is we saw maize meal as a staple food that was sustainable for a business and it’s something we knew we wouldn’t go wrong with,” Ndzaba said.

“The product that we manufacture?...?more than 80% of our population consumes this product on a daily basis and there was still a gap in that industry,” he said.

It took four years for the partners to refine their strategy after having many doors shut in their face, especially by financiers. “For years we struggled to find funding. We approached financial institutions and government agencies, but we struggled to get money,” said Ndzaba.

Once they had developed their maize meal product and it had been tested, they began approaching various retailers, including Massmart.

Companies wanted proof that he could provide orders, but potential financial backers needed to know the company had contracts in place.

But Massmart was so impressed with Lethabo’s maize meal, it invited the company to be part of its supplier development programme.

Ndzaba said Massmart is acting as a guarantor for 50% of the R8.2?million loan from Absa. This means if Lethabo Milling defaults on the repayment, Massmart will pay half of the debt, but it is not a shareholder in his company.

According to the deal, Ndzaba’s milling venture will supply Massmart with 10?000 tons of maize meal a year for its private label maize meal brand.

It also received a R1.6?million donation from Massmart as part of its supplier development programme.

Ndzaba said Lethabo Milling would be using the loan to buy a mill in Ventersburg in the Free State, which would employ 40 people.

The mill is able to produce 30?000 tons a year and Ndzaba said the company also has standing orders with Makro for its Lethabo maize meal brand and with United National Breweries for use in brewing traditional beer.

Ndzaba said the 10?000 tons Massmart had committed to was way above the company’s breakeven point, which is 680 tons a year.

He is not concerned about competing with the bigger players such as Ace and White Star, and said the market is big enough for another player. “The mill is also situated in the maize triangle where the other big brands source from, and so our quality will be on par.”

Ndzaba said he hoped the newly formed small business development department could make a difference to smaller companies that struggled to get funding.

“I think that state organs that are geared towards funding can do better. As an entrepreneur, it’s not like you want free money but when someone at a government financing institution is looking at your business plan they can be more lenient than a bank because as entrepreneurs we need a break,” said Ndzaba.

“There also needs to be a better system of monitoring. There is no point in starting a business and not being monitored and making sure that you are taking the right steps.

“So there needs to be a stringent monitoring system and they can make sure you do particular things before ordering your next purchase, for instance.”

He said he hoped the new department would work with established businesspeople, such as Richard Maponya, to help motivate emerging black entrepreneurs, especially in black communities.

“There are lots of opportunities out there and people with lots of ideas, but they don’t know how to implement them.”

And his advice to budding entrepreneurs?

“You need to have the right attitude to succeed and be prepared to work very hard.”

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