Independent Online

Wednesday, August 10, 2022

Like us on FacebookFollow us on TwitterView weather by locationView market indicators

Constraints hinder Zim sugar growers from meeting demand

Hippo Valley and Triangle Sugar are Tongaat Hulett units that supply Zimbabwe and the EU with sugar. Photo: Supplied

Hippo Valley and Triangle Sugar are Tongaat Hulett units that supply Zimbabwe and the EU with sugar. Photo: Supplied

Published Aug 2, 2022

Share

Zimbabwean demand for sugar has remained strong although local producers of the commodity, including units of Tongaat Hulett and native manufacturer Star Africa Corporation have been impacted by declining consumer disposable incomes, low yields from private cane suppliers and inflationary pressures.

Tongaat Hulett is the biggest producer as it controls Zimbabwean Stock Exchange-listed Hippo Valley and non-listed Triangle Sugar Corporation.

Story continues below Advertisement

A spokesperson for the company said last week that local demand for its products remained strong, leaving room for surpluses for export.

“Local demand for sugar remains strong and sales are in dual currencies in line with government regulations,” said the spokesperson by email.

Zimbabwe’s per capita consumption of sugar is around 24kg/year, according to a May 2022 report by the US Department of Agriculture (USDA). It adds that this “is higher than the average Africa per capita consumption of 17.2 kg/year, as well as global sugar per capita consumption of 23kg per year”.

There are also “opportunities for further growth” through exports into regional countries. StarAfrica Corporation runs Tongaat Hulett Botswana and is also a major local supplier in Zimbabwe.

Hippo Valley recently said it was awaiting finalisation of land leases for about 24 000 hectares of land on which it intends to pin expansion and independent producer programmes, an uncertainty that dampens confidence for expected production uptick.

The Zimbabwean producer is additionally maintaining “freehold” land titles over Hippo Valley South, which constitutes 16 433 hectares that is currently “largely a game park and wildlife conservation” area.

Story continues below Advertisement

Star Africa Corporation also states that “demand for our products remained strong with volumes constrained only by production” challenges. This was in addition to Covid-19 interruptions in the past two years.

The company says in 2021, all of its sugar production “was absorbed in the domestic market with demand still heavily outstripping supply”. However, meeting capacity will mean operating efficiently, which has been problematic owing to plant breakdowns and a fire at one of its facilities in Harare.

According to the USDA report, Zimbabwe’s sugar production is expected to increase by 4 percent to 3.7 million metric tonnes in the 2022/23 marketing year. However, this is based on normal weather conditions, availability of sufficient irrigation water, and an increase in area planted.

Story continues below Advertisement

“This increase is expected to be partially offset by lower sugar cane yields because farmers were unable to apply optimal amounts of fertiliser and chemicals due to increasing input costs,” the report noted.

Zimbabwe has been described as the best sugar operation for Tongaat by David Woolman, analyst turned whistle-blower on the South African agro-processing firm.

“Zimbabwe is probably the best operation but struggles with political (challenges) and the difficulty in accessing cash. It’s a very good operation, produces almost half a million tonnes of sugar per year and in good times is a very valuable asset,” Woolman said in an interview with BizNews earlier this year.

Story continues below Advertisement

Other headwinds for Zimbabwean sugar producers include a recent temporary suspension of bank-lending activities by banks. This forced Tongaat Hulett Zimbabwe to curtail advance payments to cane farmers.

The Zimbabwean industry and manufacturing sector, which takes up some of the products from Zimbabwe sugar producers, are also struggling for viability. This, say analysts, will also muzzle industrial sugar volumes for the two companies.

Sugar exports from Zimbabwe are projected to increase by 4 percent to 105 000 metric tonnes in the 2022/23 period. Main export destinations for Zimbabwe sugar are the US, East Africa (mainly Kenya), Botswana, and South Africa.

Zimbabwe is a beneficiary of the US tariff rate quota, typically receiving an annual raw sugar allocation of 12 636 metric tonnes, which allows it to export that volume of raw sugar duty-free to the US, the USDA report said.

BUSINESS REPORT

Share