17 November 2010

Zimbabwe: EU's U.S.$19 Million Sugar Strategy

Zimbabwe's sugar industry, which has battled to recover from the deadly effects of government-led violent agrarian reforms from 2000, and the devastating outcome of sweeping price controls and hyperinflation, is projected to slip out of the crisis following a US$19 million injection of bridging finance by the European Union (EU) to bankroll affected farmers and post-crisis sector stabilisation.

Chaotic and violent agrarian reforms by Harare weighed heavily on the operations of sugar producers in the past decade, with output declining from a peak of 600?000 metric tonnes (mt) per annum in the late 1990s to 259 000 mt during the 2009/2010 agricultural season.

Output plunged to 345?000 mt in 2004, or 58 percent of the industry's installed capacity.

But the European Commission (EC), the EU's administrative arm, said last week there was scope for recovery in Zimbabwe where the bloc's 27 members tap a significant percentage of annual sugar imports.

Restoring capacity will create new job opportunities for Zim-babwe, said the EC.

The bloc is particularly concerned by the drastic plunge in output from thousands of out-growers, whose cane input into Zimbabwe's sugar mills has significantly declined.

These farmers could be trapped in poverty as a result of loss of income, the EU fears.

Out of the EU financial lifeline, 4,9 million euros would be channelled into the national land audit expected following the conclusion of the Global Political Agree-ment.

"The Zimbabwe sugar industry is of strategic importance to the country's economy which is just re-emerging from a drastic decline that culminated in 2008, with a sugar production below 300 000 tonnes per year," said Aldo Dell'Ariccia, the EU's head of delegation in Zimbabwe, in a statement to The Fina-ncial Gazette.

"The European Com-mission has agreed to fund a programme to support the reform of the sugar sector of Zimbabwe to the tune of 13,7 million euros, about US$19 million. This intervention in Zimbabwe forms part of the EC's programme of Accompanying Measures for Sugar Protocol Countries for 2010.

"This project aims at restoring the capacity and the level of production of the sugar industry, on which the livelihood of more than 200 000 people depend. The EU funds will also contribute to the implementation of the national land audit programme, which is critically needed to ensure a proper framework for an increased productivity of the agriculture sector in Zimbabwe," he said.

In 2006, Zimbabwe approved the National Sugar Adaptation Strategy (NSAS).

Key areas of focus under the NSAS were arresting the decline in sugar output in the short term and reestablishing and rehabilitating infrastructure to return the industry to its former levels of production of 600?000 mt per year through the rejuvenation of existing cane production areas.

In response, to the strategy, the EU allocated 22 million euros in financial lifelines for the period 2007 to 2010.

About 9,2 euros million from the 2007-2010 allocations had been committed to support the reform, the EU boss said.

The EC's strategy on Zimbabwe's sugar sector will be focusing on channelling support to vulnerable players whose cane input to the mills has greatly declined.

Recent projections have, however, indicated that Zimbabwe's sugar industry is on the mend.

It is, however, only expected to reach full capacity in 2013.

Sugar production for the 2010/2011 seasons is expected to increase by 26 percent on the 2009/2010 output of 259 000 mt.

During the 2011/2012?seasons, output is projected to shoot by an estimated 22 percent to 450 000 mt. But while the production is looking up, the state of much of the 45 000 hectares of arable land meant for sugar in the Lowveld, the main production belt, still leaves a lot to be desired.

Industry and Commerce Minister, Welshman Ncube, said recently that the problem of absentee landlords on occupied sugar farms had continued to dog the industry.

"I have seen firsthand the challenges of existing productive land that was allocated by us to absentee farmers and the collapsing irrigation infrastructure. As government we are determined to correct the situation," said Ncube.

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