Trout farmer talks about having a small business in South Ossetia


Small business in South Ossetia

Small and medium-sized businesses in South Ossetia are going through difficult times, as the outbreak of the global Covid-19 pandemic has severely damaged their businesses. Moreover, the drop in demand and transport problems along the border between Russia and South Ossetia leave little room for optimism. Leonid Gagiev owns a fishery and the problems caused by the pandemic have also affected his business. However, he does not lose his optimism and makes new plans for the future.

Gagiev’s farm “Southern Gates” is located in the mountains, on the way from Tskhinval to the city of Kvaisa. He raises salmon and trout. The coronavirus pandemic has hit his business hard.

Essential products and almost everything needed for business are imported to South Ossetia from Russia.

After buying 300 kilograms of breeding stock in North Ossetia – that is, fish intended for breeding, Gagiev returned home to South Ossetia as usual. But customs at the border have closed due to pandemic restrictions.

“I got stuck at customs, the fish didn’t have enough oxygen and choked. I paid 1,200 rubles [about $15.5] per kilogram. Now you count the losses I suffered.

In total, there are five fish farms in South Ossetia, they are located in Leningor, Kvais and Tskhinvali regions.

“They all have issues – both because of the pandemic and transportation costs. Our turnover is low, the cost is higher than in North Ossetia. If large farms are not built, the industry will decline,” says the entrepreneur.

The owner of a fish farm in South Ossetia, Leonid Gagiev. Picture: Facebook

According to him, it also requires a good amount of food for the fish. The fry are fed with special fishmeal.

“It’s organic. They usually bring it from the Far East. But I prefer imported foods. Its production of marketable products is greater than that of Russia. Farmers in North Ossetia buy it in large quantities from distributors in St. Petersburg, and I buy it from them”.

Leonid’s volumes are small, so a kilogram of food costs him more than 200 rubles [about $2.6].

“Before, the guys from Leningrad [the area where ethnic Georgians live is called Akhalgori in Georgia – JAMnews] the guys bought me the same food in Georgia, European, and brought it straight to me in a barrel. But after the road was closed, these deliveries stopped.”

Residents and guests of South Ossetia know the Gagiev farm, its products are in demand. However, sales have dropped significantly in recent years.

“The purchasing power (of the population) has decreased, the turnover of trade has fallen by almost 10%,” explains Leonid.

The farm needs investment

The fish farm, which Gagiev created from scratch, needs investment – money is needed to expand the business. However, he failed to secure a loan from local banks.

The farmer explains that the reproduction cycle of fish must not be interrupted. According to Gagiev, “we have to feed the fry, we need new ponds. But if a [ of those things] missing, the other too.

“I am trying to get a loan from the National Bank. The market price of my farm, according to my estimates, is 12 million rubles [about $160,000]. I want to get a five million loan [about $66,700] — I need money for development. They only agree to give me three million rubles [about $40,000], but this money is not enough. I need five.”

The National Bank refuses to assess Gagiev’s farm, citing the fact that if he does not repay the loan, the bank is not sure that it will be able to sell Gagiev’s business and recoup the losses probable. Gagiev himself categorically disagrees with this position:

“I explain to them that I take out a loan not to go bankrupt, but on the contrary to develop the economy and earn money. I applied to all the presidents, but I did not have any answers”.

Small business in South Ossetia
Trout from a fish farm in South Ossetia. Picture: Facebook

In 2010, Gagiev addressed the government and presented his business plan.

“Then I was told that only 10 million rubles [about $133,300] were allocated in the budget for the development of private enterprises, and there would not be enough money for all applicants. They offered to wait until next year and promised to support me saying that the budget would be over 100 million [about $1.3 million]. But in the end I agreed and received a loan of 600,000 rubles [about $8,000]. At the same time I was promised a loan of eight million rubles [about $106.6 thousand] for next year in 2011”.

But the following year, Gagiev did not receive this money.

Subsidized government loans to local businessmen have also been denied for three consecutive years. The Cabinet of Ministers issues this money at 5% per annum through Sberbank. But the farmer failed to get a loan of five million rubles.

“They refer to a certain decree, according to which, without repaying the old loan, a new one cannot be obtained. I explain to them that I expect to receive an eight million loan promised in 2010, and that I will still repay the old debts, but without new financial injections, the company will wither. It is difficult to reach an agreement. No one wants to provide them, despite the fact that I have breathed new life into this area. There was nothing here,” Gagiev complains.

What happened?

Even before the COVID-19 pandemic, the businessman told us about his plans – he dreamed of opening a small fish restaurant. Despite the difficulties, Leonid Gagiev partially succeeded in achieving this goal:

“Among the positive events of the past three years, I note the opening of a 30-seat hall. The idea is that those who want to can taste the fish that I raise in my farm, they can come, choose the fish they like and cook it themselves and then sit in the hall, taste it. The room has everything you need for this. I provide a brazier, disposable dishes, inventory… You can enjoy.

Small business in South Ossetia
Fish products in South Ossetia. Picture: Facebook

Despite the difficulties, Gagiev does not lose his enthusiasm. Now he studies the market, negotiates with performers, assesses prospects.

“I have already spoken to store owners. I offer deliveries of gutted peeled fish in vacuum packaging. I ask 700 rubles [about $9] per kg.

Leonid Gagiev is an optimist, despite all the difficulties. By his example, he proves that small businesses in South Ossetia can survive despite all the difficulties.

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