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Harare - Executives at Hippo Valley, in which Tongaat Hulett holds a significant stake, are expecting an improvement in the company's sales volumes for the second half of the current year after the government imposed a higher tax on sugar imports.
At a briefing in Harare after the Zimbabwe-listed sugar producer's annual general meeting on Monday, Hippo Valley CEO Sydney Mutsambiwa said the group's "outlook is positive".
Other Zimbabwean companies are evidently in a pickle, with profit and revenues in Edgars Zimbabwe and Lafarge Cement last week taking a knock, mainly as a result of rising imports and weaker consumer demand.
Interestingly, cheaply imported sugar has also been problematic for Hippo Valley, which however has now received a boost from government measures to introduce taxes on imports of basic commodities and foodstuffs.
According to Mutsambiwa, those intending to export processed sugar to Zimbabwe “have to pay a 10% tax” plus a significant cash levy charged per package.
"We are delighted by the removal of sugar from the general import. Now, anyone who wants to import sugar has to have a licence. Over and above that they have to pay a 10% tax plus (cash charged) per package," said Mutsambiwa.
Sugar producers from the Southern African Development Community region in July lobbied for governments in the region to introduce total bans on sugar imports. However, analysts and trade experts said this would be difficult to put in place because of trade pacts and treaties governments had signed with trade allies from other regions.
Executives at Tongaat Hulett have also complained of a rise in cheap sugar imports which pose unfair pricing competition for locally produced sugar. Mutsambiwa said volumes for the second half of the year would improve because of a better market position following the new economic policies adopted by government to reduce imports of processed goods.
Additionally, efforts to ramp up production for the company were boosted by a better rainy season and increased productivity by private cane growers. Tongaat Hulett has a significant exposure in Zimbabwe’s sugar industry as it also has a major stake in non-listed Zimbabwean operation, Triangle Sugar Corporation.
"Because of a positive irrigation and water situation, all the land is going to be put to better use," Mutsambiwa said. Zimbabwe's sugar industry is gearing up to ramp up production capacity to enable sugar mills in the country to run at maximum capacity of 640 000 tonnes.
Sugar cane farmers in Zimbabwe have this year received funding facilities amounting to US$32m from regional banking group BancABC and sugar producer Tongaat Hulett. A new cash facility is to be made available by BancABC before the end of this year.
Zimbabwean sugar producers have a quota system agreement in place with the European Union which allows the country to export up to 200 000 tonnes of the sweet commodity into the eurozone. The remaining 300 000 tonnes of sugar is consumed on the local market.
- Fin24
