Opportunities in the Maize Milling Industry
Maize is widely grown in Uganda on subsistence and commercial farms. Cooked maize flour (posho) is animportant local staple food, and maize bran is an essential ingredient in animal feeds. The consumers of maize products, such as schools and poultry farms, are steadily increasing, creating a growing market for processed maize products.
If you have identified an opportunity for maize processing in your locality, for
instance because of the long distance that people have to travel to buy maize flour, or because of the establishment of new schools and hospitals in your area, you may consider starting up a maize processing plant. This article provides some basic information about this type of business.
Registration, Licenses and Certification
You should register the business name of the maize mill and acquire a trading license from the local authorities. These documents can be used when applying for contracts or tenders to supply products to schools, hospitals and animal feed dealers among others. It is also recommended to acquire certification from the Uganda National Bureau of Standards (UNBS) or iinquire from their local offices on the food safety requirements of setting up a maize mill processing unit and store.
Setting up the structure
A well-designed maize processing unit consists of the actual mill, the raw material store and the final product store. The processing unit should be at least 15 meters from the storage units and at least 50 meters from residential areas, to avoid unnecessary noise and vibration disturbances. The unit size should have enough space for safe working and maintenance of the machines. The minimum size for a small plant is 50 m2. The storage unit for maize grain and the final products must be dry and well ventilated. The floor should be cemented or smeared with clay/dung, and the grains should be stored in sacks on pallets. A well-lit store helps to avoid moulding of the raw and finished product. The size of the storage units depends on the milling capacity of your plant, the source of your raw materials and your operating strategy.
In any case, you should be able to store enough grain for at least 2 weeks of mill operations. For a small mill that means that you want to store at least 10 tons
(200 bags of 50 kg) of maize.
If you have little money, you can start with a small unit (100 kg/hour) and save on buildings and engines. If you have a power connection, you can use motors. The investment costs for such a set-up are below UGX 20 million for a functional set.
If you can afford it, you may set-up a fully professional outfit with a medium capacity of 700 kg/hr, proper buildings and engines for all the machines. This may cost you around UGX 40 million.
The operating costs to keep a mill going are usually underestimated. Your mill will literary grind to a halt when you have no funds to pay for the maize, the fuel, salaries and machine maintenance costs. The table below shows that you need almost UGX 900,000 to mill 1 ton (1000 kg or 20 bags) of maize, which is the maximum daily capacity of a small mill. The highest expense is the maize itself, which you may not incur when you mill somebody else’s maize.
The cost of fuel is also considerable, irrespective of using diesel engines or electrical motors. The power costs can be minimized by keeping your machine in good condition. This means regular service and replacing parts as soon as they are
worn out. Although many mill operators are trying to save costs by delaying machine maintenance, in actual fact it increases your costs due to inefficient machine operations, and reduces the quality, and therefore price, of your final product.
The pricing of your maize flour depends on your operating costs. The cost of milling does not fluctuate much over the year, but will slowly increase with the general price increases of fuel, salaries and other operational items. The table above shows that the minimum cost of milling will be around UGX 100 per kg, but can go as high as UGX 130 per kg for milling alone if the machines are worn out. To make profit you would have to price your milling at UGX 130 to 150 per kg, excluding the cost of maize itself.
When you buy and mill maize, you can make an additional profit by playing the maize market: you buy the maize cheap, store it well, mill at your own pace and sell flour when the price is high. This requires additional capital, and increases the risks of your enterprise, for instance if the maize price does not go up as much as you had anticipated. You can increase your turnover by trying to win supply contracts from big companies and organisations, such as schools, hospitals and the World Food Programme. Such contracts can be more profitable because of economies of scale, but usually demand high quality and delivery standards.
With a small unit that is efficiently operated you may be able to mill around 200-250 tons maize in a year, which will give you an income of around UGX 6-10 million and a pay-back period of 2-3 years. The larger outfit when fully operational and well maintained can mill around 1,500 tons per year. This would give you a pay-back period of 1-2 years.