Low sugar prices hit Zim expansion: Tongaat

HARARE - Plans to expand cane production and root replanting in Zimbabwe have been hindered by  depressed global sugar prices and irrigation challenges, South Africa-based agricultural commodities processor
Tongaat Hulett (Tongaat) said.

“Cane valuations have been impacted by lower prices and the effect of curtailed root replanting as a consequence of the current water dynamics,” said Tongaat’s chief executive Peter Staude, in the group’s results for the half year to September 2013.

He said cane expansion and replanting for both private and their own estates had been curtailed but will resume once water levels recover.

Tongaat holds a 50,3 percent shareholding in Hippo Valley Estates while it wholly owns Triangle Sugar.

“In Zimbabwe, the first six months have seen lower sales invoicing levels of 193 000 tonnes than the first half of last year’s 248 000 tonnes, which is a result of lower local market sales (mainly due to substantially increased imports in the market) and a timing difference on export shipments,” said Staude.

He added that with the changing dynamics in the European Union (EU), the price levels that the business is achieving for sales from Mozambique and Zimbabwe into the EU this season, from its multiple commercial arrangements and channels are averaging some six cents per pound lower than the levels in the last two years.

This comes as the group’s local operations’ operating profit for the period under review slumped to R232 million compared to the same period last year of R435 million.

Staude said the operations, employing 18 000 people, are in an important recovery, growth and expansion phase.

“A central part of this recovery is the development of indigenous private cane farmers. As at the end of the 2012/13 season, at least 670 active indigenous private farmers, farming some 11 200 hectares and employing more than 5 600 people, supplied 850 000 tonnes of cane which generated US$56 million in annual revenue for them,” he said.

“This potential is linked to how much annual production can be achieved from the existing sugar mills. Based on Tongaat’s view of its existing mills, a further 600 farmers on 12 700 hectares could supply an additional 1,4 million tonnes of cane per annum,” he said.

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