eBusiness Weekly
Enacy Mapakame
Zimbabwe Stock Exchange (ZSE)-listed sugar producing companies, StarAfrica Corporation and Hippo Valley Estate, are forecast to have good times rolling in the year and going forward as local consumption of sugar continues to firm on the back of import limitations.
Latest financial results by the two sugar companies show a significant recovery in domestic sugar consumption.
Sugar industry sales on the domestic market increased 11 percent to 334 000 tonnes in the year to 31 March 2018 from 301 000 tonnes in the prior year.
The industry is benefiting from the Statutory Instrument 64 of 2016 (SI64), which limits the importation of goods that can be locally manufactured as a way to enhance local industry and domestic consumption.
According to Hippo Valley Estates, there was an increase in total industry volume of local market sugar sales arising from favourable sales mix on the back of low imports.
“The timely intervention by Government to protect industry against competition from dumped world market imports continued to yield positive results in addition to providing job security in the industry,” said Hippo in a statement accompanying its financial results recently.
For Hippo, sugar production for the year was 21 percent weaker to 197 000 tonnes compared to 229 000 tonnes achieved in the prior year due to low dam levels that affected irrigation.
However, the sugar manufacturer indicated that standing cane valuations at year end reflect the improvement in the cane crop to be harvested, which benefited from optimum irrigation following a satisfactory 2017/18 rainy season supported by recently completed Tugwi Mukosi Dam.
Its peer StarAfrica is planning to capitalise on the anticipated local demand within both the industrial and consumer segments while export prospects are also expected to materialize.
“The company is encouraged by the developments in the wider economy, which are expected to increase demand.
“It is pleasing that the local market’s sugar requirements are now being supplied in full by the sugar industry and the company is well equipped to meet the quality and tonnage requirements of all segments of this market,” said StarAfrica chairman Joe Mutizwa.
According to the Global Agricultural Information Network (GAIN) report on supply and demand for sugar in Zimbabwe there are only two sugar mills in Zimbabwe, the Hippo Valley Estates Ltd and Triangle Estates Ltd, with a combined sugar production capacity of about 640 000 tonnes and installed milling capacity of 4,8 million tonnes of sugar cane per annum.
Currently, Zimbabwe has two sugar refineries, namely, the Triangle Sugar Refinery, which is a back end refinery and StarAfrica Sugar Refinery Ltd.
The two main categories of consumers are manufacturers (beverages, confectioners, bakers and pharmaceuticals) and households. Domestic white sugar consumption is usually 30 percent and the remaining 70 of domestic consumption is brown sugar.
What are the prospects?
Overall, due to the normal growing conditions and crop improvements, sugar production is projected to be between 433 000 and 483 000 tonnes in the 2018/19 season, further growing to 500 000 and 560 000 tonnes in the 2019/20 season.
The local market has continued to grow on limited imports, especially in the manufacturing sector, for industrial consumption.
For StarAfrica, work is already underway to develop export markets and with the ground work covered so far, the firm anticipates to start seeing results in the ensuing year.
“The company managed to send (sugar) to Botswana where it is confident that sales of not less than 6 000 tonnes will be achieved in the coming year.
“There is also advanced exploratory work for central African market from which the company also expects some pickings in the year,” said Mutizwa.
It will be better positioned to benefi¬t from the opportunities arising from evolving access into regional defi¬cit markets which are expected to grow in per capita sugar consumption in the short to medium term as well as growth in the local market.
Other benefits of the import limitations
Government’s move to limit imports of products that can be produced locally has not only benefited the sugar industry with increase in local demand.
Following promulgation of the SI64, manufacturing sector capacity in 2016 improved to 47,3 percent from prior year’s 34,3 percent. For 2017, utilisation dropped to 45,1 percent as industry battled foreign currency shortages.
Apart from increasing industry capacity utilisation and local consumption, the import management strategies also increased foreign direct investment into Zimbabwe. Countries that used to export into the country moved to set up manufacturing plants in the country.
Companies moved to Zimbabwe
Willowton group of companies has set up a cooking oil and soap manufacturing plant in Mutare while Zambian Trade Kings also set up a state of the art detergent plant in Harare.
