Hippo Valley squirms amid sugar imports
ZIMBABWE Stock Exchange-listed sugar manufacturer Hippo Valley Estates says it is engaging the authorities over the influx of cheap imports despite registering growth in domestic sales and a decline in exports.
The government recently removed duty on imported basic commodities like sugar to cushion consumers from rising prices on the domestic market. Zimbabwe year-on-year inflation, which stood at 256.9% in July, has been on an upward trend, pushing up the cost of living.
According to the company’s trading update for the quarter ending 31 March, Hippo Valley’s share of total industry sugar sales volume of 394 000 tonnes (2021: 440 000 tonnes) for the year ended 31 March 2022 was 53.2% (2021: 50.0%). Hippo Valley is a unit of Tongaat Hulett.
Total industry sugar sales into the domestic market for the year at 356 000 tonnes (2021: 325 000 tonnes) were 10% higher than prior year, driven by strong domestic demand. Industry export sales however, decreased by 67% to 38 000 tonnes (2021: 115 000 tonnes) following redirection of supply to the local market in view of the increased demand.
Price realisations on the local market, the company said also remained firm in current purchasing power terms. While local market US dollar sales were firm at the beginning of the year, these subsequently slowed down owing to limited availability of foreign currency within the economy. The Zimbabwe sugar industry has a single marketing desk at brown sugar level, administered by Zimbabwe Sugar Sales (Private) Limited (ZSS).
“Although local demand for sugar remains strong as industry recovers from the impacts of Covid-19, the sugar industry is engaging authorities to ensure an even competitive playing field against cheap imports of sugar originating from surplus producers who enjoy duty protection in their host countries,” the company says.
“This is also in an attempt to safeguard the health of the local population as some of the sugar imported is not vitamin A-fortified, as required by law. The substantial off-crop maintenance programme has been successfully completed and the mills have started the new season well with focus being on increasing production and capitalising on efficiencies. Operating and trading conditions are likely to remain challenging in the current milling season, with farmers and millers contending with high cost pressures on account of both local and global inflationary dynamics, exchange rate volatilities, high cost of funding and supply chain bottlenecks, resulting in pricing of local products difficult in the short to medium terms.”
The company’s share of total industry sugar sales volume of 94 257 tonnes (2021: 98 718 tons) for the quarter under review was 54.5% (2021: 52.1%). Total industry sugar sales into the domestic market for the quarter at 84 228 tonnes (2021: 91 645 tonnes) decreased by 8% compared to same period prior year largely due to reduced production as well as purchasing power constraints experienced by customers. The price realisations in both local and foreign currency on the local market suffered negatively from the adverse exchange rate dynamics on currency.
“In order to further contribute to socio-economic transformation and to facilitate inclusion of more local farmers in the sugar value chain, the company together with Triangle Ltd, is actively assisting new farmers who have been allocated virgin land with clear water rights and in areas close to the mills, with technical and commercial feasibility studies, mobilisation of funding and where required actual development of the land to sugarcane on a full cost recovery basis. Good progress has been made with respect to the development of 1 168ha of Pezulu Project with one local bank having availed US$5.2m (about 50% of the total development cost) with other banks indicating a willingness to fund the balance,” the company says.