Business Reporter
ZIMBABWE’S sugar producers are expecting volume recovery this year following the resolution of raw sugar supply challenges that had threatened the viability of the sector.
Hippo Valley produces approximately 50 percent of the local sugar, while starafricacorporation manufactures and markets sugar-based products under its well-known brand Goldstar Sugar.
Sugar was among a number of products that were allowed to be duty-free for the 10 months prior to the issuance of Statutory Instrument (SI) 10A of the 2024 Customs and Excise (Suspension) (Amendment) Regulations, 2024 (No. 272) in February 2024, which reintroduced the duty.
The goods under the duty-free category also included cooking oil, maize meal, milk, rice, flour, salt, bath soap, laundry soap, washing soap, washing powder, toothpaste and petroleum jelly.
starafricacorporation chairperson Mr Rungamo Mbire said the business expected volume recovery going forward, largely as a result of the resolution of raw sugar supply challenges; and the plant refurbishment and replacement programme, which was on track.
“The business also continues to improve operational efficiencies and reduce costs with the aim of returning the business to profitability,” he said in a statement of financials for the year ended March 31, 2024.
During the year under review, operating unit Goldstar Sugars (GSS) reported a 32 percent decline in sales volumes of granulated white sugar from 82 321 tonnes (t) in the previous year to 55 799t.
“Production throughput at 52 605 tonnes was 32 percent lower than the prior year’s tonnage of 77 270 tonnes due to raw sugar supply issues. Active engagements with our various stakeholders have largely resolved the raw sugar supply challenges,” said Mr Mbire.
He noted that GSS continued with its refurbishment and replacement programme for critical components of plants and machinery to improve efficiencies and the quality of refined sugar.
Zimbabwe has over the past few years been producing an average of 400 000t of sugar a year, against an annual consumption of 300 000t, leaving a surplus of 100 000t, which is exported.
The Zimbabwe Sugar Association (ZSA), an umbrella body representing cane millers, has assured consumers that there are adequate stocks of sugar from the previous milling season, enough to last until March 2025.
Hippo Valley said the suspension of import duty on basic commodities, including sugar, affected the industry significantly, and the company was not spared from the effects of such a move, which contributed to the decline in financial performance.
“With the recent repeal of the SI, the local market anticipates enjoying protection against unfair competition from cheap world market imports as the local market share is restored.
“Additionally, the reconfiguration of the route to market and implementation of innovative work streams to contain the cost of goods and services through Project Zambuko (a revenue enhancement and cost reduction project) will enable the business to achieve key metrics around profit maximisation,” Mr Tendai Masawi, the group’s chief executive officer, said in the company’s 2023 financials.
He noted that during the period under review, the export sales volume for the industry increased by 148 percent to 108 374t from 43 761t in 2023.
Mr Masawi indicated that international sugar markets were residual markets for excess sugar and, accordingly, export market prices were typically lower than domestic market prices.
Research and stockbroking firm IH Securities said the repeal of the SI early this year would allow Hippo Valley Estates to reclaim some of its lost market share in 2025.
According to IH Securities, domestic market sales for the sugar industry were hamstrung, with volumes declining by 16 percent from FY2023 to FY2024.
“This SI was, however, repealed in early 2024; therefore, Hippo should be able to claw back some of its lost market share in FY25, resulting in volumes and revenue recovery,” it said.
According to Hippo’s financials, domestic market sales for the sugar industry experienced immense pressure, with volumes declining by 54 770t (16 percent) to 283 289t compared to 338 059t in 2023.
“However, the more aggressive tax structure effected on January 1, 2024, will continue to exert upward pressure on the cost of doing business, impacting the company’s profitability.
“In addition, we expect margins to remain under pressure as cost lines continue to firm in real terms due to imported inflation,” IH Securities said in its report.
IH further said Hippo has made headway in securing its 99-year leases, with 16 802 hectares having been signed off as of year-end.
A La Niña weather event is forecast for the 2024/2025 season, and management has stated that the relevant major dams are holding enough water to support optimal irrigation regimes for the coming season.
“This, compounded with management’s strategic focus on improving yields, is expected to result in higher yields in FY25,” IH said.
Although there was modest expansion in hectarage from 79 722 in the 2022/2023 season to 79 728 in the 2023/2024 term, the ZSA is still confident of producing enough to meet national requirements.
ZSA chairperson Mr Willard Zireva also noted that the current drought induced by the El Niño phenomenon will not have any impact on the availability of sugar on the market.
“There will be adequate sugar supply for both household and industrial consumption despite the current El Niño-induced drought that the country has experienced, which has affected the harvest expected from the other agricultural crops,” he said in a recent statement.
Sugar cane is a 12-month crop grown under irrigation in Zimbabwe and, according to Mr Zireva, the major dams that supply water for sugar cane irrigation in the Lowveld have sufficient water to last the next two seasons.
