adminGROWING sugar demand in the country is expected to offset the planned phasing out of export quotas to the European Union by Tongaat Hulett’s Zimbabwean unit, Hippo Valley. The country’s per capita sugar consumption is estimated at 24,6kg this year, with experts saying consumption patterns are largely “influenced by availability” rather than by price.
Tongaat Hulett’s two units in Zimbabwe – Hippo Valley and Triangle Sugar Corporation – are significant contributors to its revenues. Hippo Valley’s after-tax profits for the year to the end of March declined to US$13,6-million from US$20,9-million.
Domestic sales grew to 258 000 metric tonnes, up from 247 000 tonnes last year, while 202 000 tonnes were exported to the EU under preferential market arrangements existing at the time. Now there are reports that the export quotas to the EU may be phased out.
Tongaat Hulett is facing increased pressure from the Government to comply speedily with its indigenisation policy, which requires that foreign groups give up majority shares in local units to indigenous Zimbabweans. However, most foreign companies are banking on what some see as a softening of this approach by new Indigenisation Minister Francis Nhema.
Analysts at Imara Africa Securities said they did not believe “there will be any significant interruptions to the operations of Hippo based on precedence set with other indigenous cases” in the country.
“Our expectations are for Hippo to eventually come up with an employee share ownership scheme and cede stakes in the company to community ownership schemes,” the analysts said in a new report on Wednesday.
However, the company is still facing an uncertain future in Zimbabwe over its land, portions of which the government has listed for takeover.
“With land remaining a sensitive issue in the country, however, nothing can be assumed with any certainty,” the analysts added.
They said Hippo Valley’s “exports to the EU remain at risk from the planned phasing-out of the EU quota and tariff structure”, which had previously boosted the company’s export sales volumes.
Additionally, out-of-quota beet and cane sugar from other developing countries that are being imported into the EU on reduced levies and import duties have “placed a lot of pressure on sugar prices in general” — a situation the analysts said had dimmed “the prospects for Hippo Valley’s exports”.
Early estimates indicate that Zimbabwean sugar producers will produce 460 000 tonnes of sugar during the current period. That is, however, 28 percent below the industry’s installed capacity of 640 000 tonnes.
The Zimbabwe Stock Exchange-listed Hippo Valley is forging ahead with an ambitious private farmer sugar-cane rehabilitation programme aimed at boosting production capacity in the country.
Tongaat’s two operations in Zimbabwe, which employ 18 000 people, are in an important recovery, growth and expansion phase. — BDLIVE
Online Reporter
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