Maize meal produced by rural farmers at the Mqanduli Rural Enterprise Development Hub (RED HUB) milling plant outside Mthatha has hit the Spar Group stores in the Eastern Cape in an eight-year trade support package anticipated to grow sales revenue to in excess of R30 million by year five.
The rural farmers are organised around a Rural Enterprise Development Hubs model spearheaded by the Eastern Cape Rural Development Agency (ECRDA).
These RED HUBs aim to catalyse, develop and sustain as much of the production value-chain as is feasible within the village and local economy.
The first 24 tons of maize meal from the Mqanduli RED Hub found its way onto shelves at 11 Spar stores in April early this year. Within three months, the Spar Group placed an order for an additional 24 tons of the product. The maize meal is sold in 12,5kg and 10kg bags.
The volumes allocated to the Spar Group from the Mqanduli Mill is expected to grow to 1800 tons or R7,5 million a year in the first two years, ramping up to approximately 9500 tons by year eight.
“Trade negotiations with Spar Eastern Cape, facilitated by the FMCG Supplier Development Initiative, in association with the Eastern Cape Department of Cooperative Governance and Traditional Affairs (COGTA), aim to support rural farmers, producers and manufacturers with access to large volume consumer demand markets,” says ECRDA chief executive officer, Nhlanganiso Dladla.
“This is a first for the Eastern Cape. The Spar Group demonstrated its commitment to support the commercialisation aspirations of this local supply chain partnership, the Mqanduli RED HUB, with an eight-year arrangement which is a specially developed ‘Trade Support Package’. The agreement provides a crucial market access platform for their products. “
Dladla says that the maize meal, by agreement, is priced comparative to the Spar private label brand.
“In terms of the agreement, the RED HUBS would enjoy a substantial reprieve in the ‘cost of trade’ that include rebates, marketing, warehousing and other fees,” he adds.
“In affirming this development, the Department of Rural Development and Agrarian Reform (DRDAR) is also set to support an expansion in farmed land and output from rural farming communities supplying the RED Hubs with feedstock.”
Agreement to grow rural Eastern Cape farmers
Spar Eastern Cape Divisional Executive, Siyolo Dick, said that, as part of the agreement, the retail giant would provide the qualifying emerging sector, Fast Moving Consumer Goods supply chain partners with a “Trade Support Package” spanning the first eight years to grow the localisation of consumer food supply chains.
This is a major boost for the province and the emerging agro-industrial manufacturing sector.
“The package kicks in from the start-up phase of the supplier which includes specific financial concessions, product uptake benefits, marketing and logistics support as a ramp up model of local economic empowerment,” said Dick.
“In this way Spar is demonstrating its commitment to the development of emerging farmers and manufacturers of consumer products. The development of emerging farmers in the Eastern Cape coincides very well with our ‘Choose Local’ Campaign.
” Spar Eastern Cape is continuously engaging with the public sector in the Province, in this regard.”
Dladla said, based on the success of the sales, the ECRDA-supported RED HUB mill has resolved to embark on a province-wide brand marketing campaign to be held at seven selected Spar stores who have supported the product.
This should provide a growing market for the product going into the festive season.
“Discussions are also underway with Boxer stores to extend the supply to their stores in the Eastern Cape and KZN in the new year,” Dladla added.
“This access to market model will expand to include all retailers and wholesalers who value socially responsible consumption, with a special emphasis on good business practices and protection of the domestic industry.
“The expansion will also include a growing product range over time.”