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Enacy Mapakame
Inflationary pressures took a knock on the sugar industry as total domestic sales volumes the third quarter to December 31, 2019 took a 29 percent dip compared to same period in the prior year on the back of low disposable consumer spending.
According to figures released by one of the leading sugar producing companies, Hippo Valley Estates, the industry sold 265 805 tonnes of sugar during the quarter, which was 29 percent below prior comparable period.
The country has been experiencing economic volatility, which significantly reduced consumer spending subsequently affecting consumption patterns.
Companies on the other hand, have also felt the heat as volumes are going down across most sectors, putting margins under pressure.
“Total industry sugar sales into the local market for the quarter ended 31 December 2019 were 29 percent below prior year at 265 805 tonnes reflective of weak disposable incomes,” said Hippo in a statement accompanying its trading update.
However, on the upside, total industry exports jumped 23 percent during the period to 67 355 tonnes compared to same period in the prior year.
Exports are seen as the answer to the country’s economic woes as they will help reduce the trade deficit as well as enhance foreign currency earnings for the country.
Hippo indicated that the growth in exports helped the group access the much needed foreign currency. Peers, Star Africa also indicated export-led earnings growth for that same quarter.
Revenues for Star Africa jumped 208 percent compared to the same period in the previous year driven by price adjustments as well as export sales growth especially into South Africa, Namibia and Botswana.
For sugar producing companies, growing exports will make them tap into the anticipated growth in global sugar consumption.
According to the International Sugar Organisation, world sugar consumption increased between 2001 and 2018, from 123,454 million tonnes to 172,441 million tonnes, the equivalent to an average annual growth of 2,01 percent.
However, the second half of the past decade saw a considerable deceleration in world sugar consumption growth to less than 0,84 percent per annum (average for 2016-2018).
The industry is, however, projected to reach 199,6 million tonnes by 2024, expanding at a CAGR of nearly 1 percent during 2019-2024.
While Zimbabwe is not among the top sugar cane producers, the projected growth in global sugar consumption is an opportunity for the country to tap into both regional and international markets.
India, Brazil, the European Union, China and United States of America are among the top producers as well as top consumers of sugar.
In Zimbabwe, sugarcane plantations expansion taking place in the Lowveld under the Kilimanjaro Project, will result in increased supply of raw sugar at competitive prices for both the local and export requirements.
Last November, President Mnangagwa launched Hippo’s US$40 million Kilimanjaro Sugar Cane project in Chiredzi, which has been dubbed a game changer in sugar cane production.
According to Hippo, there is progress on the project, which on completion will contribute significantly to the industry target of full utilisation of installed milling capacity of 600 000 tonnes sugar by 2023/24, positioning the country to be one of the most competitive sugar producers in the region and globally.
Said Hippo: “Work on the 4 000 hectare out grower cane development project in partnership with Government and local banks (Project Kilimanjaro) is on-going with a total of 2 700 hectares of virgin land having been cleared and ripped, 400 hectares planted to sugarcane, 6 of 12 storage dams built, two pump stations installed and canals constructed.”
Bongani Ndlovu