Zimbabwe Sugar Sector Has Growth Potential

Sugar cane

A GLOBAL markets research think-tank, BMI Research, says Zimbabwe’s sugar sector has potential for growth once there is an improvement in access to key export markets.

Such a development could lead to increased productivity, the think tank said.

In its forecast for the medium term, the United Kingdom-based firm said Zimbabwe’s sugar sector could grow by a marginal 14,6 percent in five years to 2019 if factors that militate against increased production were removed.

“We are more optimistic regarding the sugar sector, where access to key markets and potential for productivity improvements will drive production over the long term. Although we forecast a domestic sugar market surplus, the sector remains below potential and our forecasts are relatively subdued despite our expectations for higher average prices than current levels in the coming years,” BMI said in its report released this month.

“Sugar production to 2018/19 (could increase by) 14,6 percent on the 2013/14 level to 561 800 tonnes. An overall improvement in sugarcane yields, greater efficiency of mills and long-term access to export markets will be key drivers of production growth,” the report said.

With offices in London, New York, Singapore, Hong Kong, Dubai and South Africa, BMI Research’s forecasts, data and analyses are used by multinationals, governments and financial institutions to guide strategic, tactical and investment decisions. Its clients include a majority of Global Fortune 500 companies.

Zimbabwe’s main sugar producer, Hippo Valley Estates Limited, last year indicated that production levels in 2016/17 would largely depend on the extent of rainfall received in the catchment area of the industry’s supply dams as the quantum of irrigation was being reduced as a measure against potential poor rainfalls.

The country is currently in the throes of an El Nino-induced drought, a situation that could further compound the woes of the sugar industry, which is based in the low rainfall lowveld region.

Last year, Hippo Valley chairperson, Murray Munro, indicated that the local sugar industry was facing challenges resulting from lower consumer spending, compounded by tighter liquidity challenges, high unemployment levels, coupled with depressed sugar prices in the export markets.

“The sugar industry is forecasting a decrease in sugar production of between 410 000 tonnes and 445 000 tonnes for the full year (2014: 445 000 tonnes), as a result of lower cane yields by both the sugar milling estates and the private farmers,” Munro said.

Hippo Valley is majority-owned by Tongaat Hulett (Tongaat), which last year indicated that exports to the European Union (EU) market was currently unviable because of high, local production costs.

Tongaat’s corporate affairs and communications manager, Adelaide Chikunguru, told the media that harsh regulations imposed by the European economic trade bloc also made it difficult for African sugar exporters to viably export to the market.

“The European Community has determined that the price of sugar in the EU should be as close to world market pricing. This makes the market unviable due to the high costs of production associated with Zimbabwe sugar and other African countries,” she said.

Zimbabwe has been exporting sugar to the EU under an Economic Partnership Agreement.

Source: Cyril Zenda for the Financial Gazette/AllAfrica