One of the most progressive operations of its kind in South Africa, Coega Dairy started production in December 2012.
“The reason we’re growing is primarily due to market demand,” says chief executive officer Victor Korsten. “The South African market is expanding quite dramatically, and for us to be able to service that market effectively, we need to capitalise on the growth opportunities.”
The Eastern Cape is South Africa’s largest dairy producing region, accounting for 30% of milk production.
Coega Dairy aims to distinguish itself in three key areas: environmental friendliness, community involvement and empowerment of workers. “It’s the cornerstone of our business,” says Korsten. “We also have to ensure that the quality of our product is good for the consumer and that the right products are on the shelf.”
The dairy processes its milk into sterilised products, of which ultra-high temperature (UHT) milk is the main one. The cream obtained during the process is used for butter production.
“We also do a lot of work for one of the large retailers in South Africa for their private labels, and most of the milk then goes to them,” he says.
The Coega Empowerment Trust, which owns 38% of the business, is made up of three secondary trusts held by factory and farm workers, and the Amadlelo Project Trust, which is responsible for farm development in rural areas.
Korsten says MCEP funded the empowerment trust portion at start-up, while the rest of the capital investment for the business was funded by the remaining shareholders.
Aside from start-up capital, MCEP also financed factory upgrades in 2013, with a third allocation to fund growth bringing the total MCEP contribution to about R70-million.
Korsten says the Industrial Development Corporation and the Department of Trade, Industry and Competition, were key stakeholders in the business because of the funding, “but also because they bought into our vision”.
“If we didn’t have those funds, we simply wouldn’t have been able to grow to where we are. We have a positive relationship, with regular strategic discussions about the way forward.”
Korsten says having the funds to set up a greenfield operation from day one gave his company the competitive advantage from the outset.
“We were fortunate that we could start with a plant that consumes less energy, water and chemicals, and discharges less effluent.”
Coega Dairy has a low carbon footprint, and many new players entering the market are starting to follow suit. The green technologies are efficient and actually enhance the quality of the milk, he says.
“The technology allows us to produce a better-quality milk because we’re not handling it that often and subjecting it to multiple processing phases.”
Milk is collected mainly from the Tsitsikamma and Grahamstown areas, the Sunshine Coast region, and as far inland as Cradock.
Around 20% of the supply comes from developing farms, which train previously disadvantaged farm, parlour and dairy managers in the latest production methods and high-tech equipment.
“One of our main objectives is to ensure that the milk producers have a secure and stable buyer for their raw product,” says Korsten. “In turn, because our farmers are shareholders in the business, we have a secure milk source.”