3 December 2012

Zimbabwe: Sugar Industry in Robust Growth

ZIMBABWE's sugar industry, which suffered setbacks as a result of realignments in the agricultural sector during the land reform programme, has entered a growth phase with output now projected to rise to 490 000 tonnes this year from 259 000 tonnes during the 2009/10 farming season, a listed concern said last week.

Tongaat Hulett, the controlling shareholder in the Zimbabwe Stock Exchange-listed sugar producer, Hippo Valley Estates Limited, which reported a 29 percent rise in turnover to US$90,7 million during the six months ending September 30, 2012 from US$70 million during the prior comparative period in 2011, said last week central to this growth was a significant improvement in yields.

Tongaat said output from small-scale cane producers had also increased.

"The sugar industry in Zimbabwe, employing 18 000 people, is in an important recovery, growth and expansion phase, which will create sustainable value for all stakeholders," Tongaat said in a statement accompanying results.

"A central part of this recovery has been the re-establishment of cane growing by improving agricultural yields on company-farmed estates and substantially developing indigenous private cane growers. In the current season, 611 indigenous private growers, farming 11 138 hectares and employing 5 569 people, will supply 772 000 tonnes of cane generating for them US$50 million in revenue," Tongaat said.

The company projected that an additional 611 farmers could increase output to 1,4 million tonnes per annum.

"Based on the current market dynamics, these indigenous private cane farmer developments could generate annual revenue of US$150 million and employ 12 000 people.

Inexperience and lack of capital to produce sugarcane on their new farms by local farmers who moved into sugar cane production from 2000 led to a significant decline in output and quality of cane.

But as taking place across other farming sectors like tobacco, new farmers have been gaining experience and output has been increasing.

Their major handicap had been access to capital, which sugar produces like Hippo have been ready to roll out through several schemes.

Hippo's production tracked the robust growth in national output, cane climbing by 35,6 percent to 160 910 tonnes, from 118 654 tonnes during the same period last year.

However, despite the growth in revenue and output profitability declined, with post-tax profit sliding by 19,2 percent to US$11,1 million from US$13,7 million last year, driven by an 18 percent rise in input costs following wage hikes.

Operating profit decreased to US$17,4 million during the review period, from US$21,2 million during the prior comparative period.

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