South African food manufacturer Foodcorp will invest more than R47-million on a new 8 000 m2 rusk factory on the original farm from where food pioneer Ouma Greyvensteyn began producing her famous rusks in 1929.
CEO Justin Williamson reported on Wednesday that the project would be the biggest-ever investment for the small town of Molteno, in the Eastern Cape, and would replace the current facility, which was more than 50 years old.
The company formed a public-private partnership with the Eastern Cape government, Inkwanca local municipality and State utility Eskom in undertaking the upgrading of its rusk manufacturing plant.
Construction of the new facility started about two months ago and it was set to be completed in December, with commissioning scheduled for March 2013.
The upgrade would see the factory’s capacity being ramped up from the current 16 t/d to 23 t/d, while also being able to accommodate a third production line in the future. “We are looking to expand the Ouma brand into biscuits,” Williamson said.
Last year, Foodcorp looked at closing the Eastern Cape factory and moving production to its 22 ha Randfontein properties, as its operations were constantly being disrupted by power outages, while the poor quality of water and roads added to the challenge.
“In the prior financial year we had 91 power outages,” he noted.
Williamson said the company was initially keen to build a new factory in Gauteng, as it would also allow for R6-million in transport and associated savings each year. “Building a factory in Molteno costs us about R7-million more than to build it here. And 70% of our rusk market is in Gauteng and north of Gauteng, while the current facility is 800 km away,” he noted.
Despite, the economic viability of moving production to Gauteng, Willimson said the company made a “moral” decision to rather invest in the Eastern Cape facility.
He pointed out that Foodcorp was currently the biggest employer in Molteno, with its 250 workers at the plant.
“If we left, the consequences would be devastating for the local residents, so we persuaded our board to, despite the additional costs, retain the plant in Molteno,” Williamson indicated.
“We retained 250 jobs and it will grow, as the business is scheduled to grow,” Williamson noted.
Meanwhile, the Eastern Cape government and the Inkwanca local municipality have committed R6-million towards the infrastructure required to successfully deploy the project. This included the direct supply of electricity from Eskom to the factory at a cost of R700 000 and the construction of a water purification plant worth R2-million.
Williamson predicted that food prices were bound to increase, driven up by rising fuel, soft commodity and energy costs.
However, he believed that it would only be a short-term spike that would come down by May next year, owing to extensive production of soft commodities globally.
“Particularly in the basic food categories you will see degrees of inflation…for the next six to seven months, and then it will come down again as the new maize and sunflower crops come in,” Williamson stated.