Driving Sustainability: Parag Mehta on Silafrica’s Packaging Expansion in Mozambique

What was your journey to becoming the Business Manager in Mozambique, and what motivates you in this role?

When I was approached with the idea that the company was about to start operations, they knew I had been part of the group previously. I was excited to hear a new project was coming up, and they were looking for someone to start it from scratch. Starting something from the ground up presents a motivation and challenge for me, allowing me to create something of my own rather than building on an established foundation.

I was also familiar with the organization, its corporate culture, and its ethics, which made me want to be part of it. Contributing to society, engaging in ethical work, and managing business responsibly are essential values, especially in Africa.

How has Silafrica established its presence in Mozambique, and what key products and services do you offer in the local market?

Silafrica established its presence in Mozambique in 2003. We began by registering the company and submitting projects to the APIEX, an autonomous body that facilitates the import of capital goods, like machinery, without duties to support investments in Mozambique. After receiving approvals from the Ministry of Industry, Ministry of Environment, and Ministry of Commerce, we brought in our injection molding machine for crate production and completed installation.

Currently, we are awaiting the new mold, following a design update by Coca-Cola to create a more sustainable, improved crate. We worked closely with Coca-Cola’s team to finalize the design, and the mold is now almost ready. We expect to receive it in 15 days, after which production will begin.

What products and services will you offer?

The first product we will produce is a crate for Coca-Cola’s glass bottles, under a five-year contract for their required volume. We are also reaching out to other companies, like CDM and Heineken, to expand our business. Once operations begin, we can approach these clients more actively and build their trust in our services.

How did you secure 100% of Coca-Cola’s business volume in Mozambique before starting operations, and what does this mean for Silafrica’s growth in the region?

Before starting operations in Mozambique, we proactively engaged with local companies. Our team, including representatives from Tanzania, met with CEOs multiple times to discuss the packaging industry’s challenges. Mozambique currently has only one player, creating a monopoly, so there was strong interest in having another company enter the market for greater competition.

Our ongoing discussions and favourable responses led management to set up a plant here. During last year’s tender process, we submitted competitive quotes. Coca-Cola already knew our company from partnerships in Tanzania and Kenya and trusted our ethics and processes. They saw us establish the warehouse and progress with the setup, which built their confidence and ultimately secured us the business.

What major challenges does Mozambique’s packaging industry face, and how is Central Africa addressing them?

There are several challenges for the packaging industry in Mozambique. First of all, there is the limited infrastructure and logistics. Mozambique depends on South Africa for most supplies, and there is a lack of basic infrastructure, making logistics very difficult. The country is about 2,700 kilometres long, resulting in high logistics costs. One side of the country is primarily a port. We have three major ports in Mozambique: Maputo, Beira, and Nampula. Transporting something from Maputo to Nampula costs almost the same as importing it from somewhere else. This is one reason companies hesitate to start operations in Mozambique.

The second challenge is high import dependence, as it is easy to import goods due to the proximity of the ports. Mozambique serves as a corridor for all the neighboring African countries.

Third, environmental concerns and waste management are significant issues. We do not have the infrastructure to manage waste and support the environment. While we can set up industries, we need an environment that supports us in managing waste without harming the environment. We need recycling companies to handle the waste produced, allowing us to recycle and resell materials.

High production costs are another challenge. The lack of basic infrastructure and skilled workers leads to high costs. Many essential tools and support materials are imported.

There is also a skilled worker shortage due to limited technical universities, which makes it challenging to find skilled labor.

Lastly, price sensitivity is a significant issue because the general population in Mozambique is relatively poor, with many close to the poverty line. Companies must maintain price competitiveness. If they produce and import everything from abroad, high logistics costs hinder their ability to compete with lower-priced products from Asia, especially from countries like China, India, and Pakistan. These are the major challenges a company faces in establishing itself in Mozambique.

What will you produce for Coca-Cola, and how will your products be different from the current supplier in Mozambique?

In terms of the product, we have a better design. We collaborated with the Coca-Cola team to create a stronger and more sustainable product. For example, if the lifespan of a plastic crate is typically five years, we aim to innovate it to last seven or eight years, contributing to environmental sustainability.

Additionally, a stronger and more reliable product means Coca-Cola will need to invest less in capital expenditure. Our first goal was to create a new design that is both stronger and more sustainable, drawing on our extensive experience with various companies in Africa.

Second, we utilize the latest machines that are 30% more energy-efficient and increase productivity, which lowers production costs significantly.

The third major advantage is our commitment to ethics. In Mozambique, some companies engage in unethical practices, which we do not. This commitment builds trust in us as a South African brand, giving us a significant advantage over our competitors.

How are you incorporating environmentally friendly practices in your operations in Mozambique? What specific actions are you taking to promote sustainability?

We are going to establish a recycling plant to handle all waste generated, creating a closed-loop system. In this system, products are collected, recycled, and reintegrated into new products. We will collect old or broken crates from Coca-Cola, regrind them, and combine them with virgin material for reuse.

Additionally, we will use eco-friendly production techniques. Our latest machines are designed to be 30% more energy-efficient compared to other injection molding machines, which helps reduce our carbon footprint. We will implement waste reduction methods to ensure all waste is properly collected and recycled, rather than disposed of irresponsibly.

Our new crate design features seven layers instead of six, increasing strength and extending the product life. This means the plastic remains in circulation longer, reducing the burden on recycling.

We will also focus on educating our staff and the community about reducing waste and adopting better techniques. Partnering with organizations that promote environmental initiatives, such as tree planting and investing in innovative ideas, will be an essential part of our commitment to sustainability.

How will your company create jobs and support the local economy in Mozambique? Are you hiring local workers?

So in the current structure, we are going to have around 24 local staff, local Mozambicans, where it is not just lower cadre. It is from the operators to the supervisors to the plant managers. We are going to hire approximately 24 local staff. Also, when the project grows, we will have more machines and more people working with us.

These are the people who are directly working with us, but we will also have a team supporting us in collecting the crates, regrinding, and recycling them at the customer end. For transportation, we will use local transport to get the crates from other sources and supply them throughout the country to Coca-Cola. In general, there will be many more people in touch with us, and this is how we will contribute to the economy.

What are your strategic goals for Silafrica in Mozambique over the next two to three years, and how do you plan to achieve them?

The first and foremost plan is to get more business from the breweries and beverage industries. Once the machine is set up and production is underway, we can approach them, and they will have more trust due to the contract we have achieved with Coca-Cola, which will attract other customers to us.

Next year, we plan to install another injection molding machine, which will give us spare capacity to enter the paint pail market. Currently, almost 95% of the paint pails are coming from South Africa, and no one is producing them in Mozambique. We will be a local presence and try to capture that market.

Our next plan is to invest in closures. No one is producing closures in Mozambique. Those who do produce are self-sufficient. Additionally, some preforms are not being produced in Mozambique. Many soft drink and water companies produce their preforms, but larger companies, such as those for 5 or 10-liter jars, are still importing them. We are looking into that market as well.

We also have a plan to enter the rotomold tank market. There are various avenues we are exploring, and in the next five years, our plan is to start producing preforms, closures, paint pails, and rotomold tanks.