Zim sugar exports to EU unviable: Tongaat

HARARE - Tongaat Hulett (Tongaat) says sugar exports from Zimbabwe to the European Union (EU) are unviable due to the high cost of producing the commodity in the southern African country.

Adelaide Chikunguru, Tongaat’s corporate affairs and communications manager, said tough regulations imposed by the western economic trade bloc made it difficult for African sugar exporters to make profit.

“The European Community has determined that the price of sugar in the EU should be traded at prices as close to world market pricing. This makes the market unviable due to the high costs of production associated with Zimbabwe sugar and other African countries,” she told businessdaily.

Zimbabwe has been exporting sugar to the EU for the past few years under an Economic Partnership Agreement.

Tongaat, which wholly owns Triangle Limited and 50,3 percent of Hippo Valley in Zimbabwe, supplies more than 90 percent of the country’s processed sugar demand.

Zimbabwe consumes about 300 000 tonnes of sugar annually.

“The sugar production estimate given in our November 2014 statement was between 440 000 tonnes and 475 000 tonnes. The total local market sugar requirement for the year will be fully met by Tongaat Hulett operations in Zimbabwe,” said Chikunguru.

However, there have been fears of sugar shortages in the market due to increased ethanol production in the country.

“The Triangle ethanol plant produces ethanol from molasses, which is a by-product of sugar production. No cane is diverted to ethanol production,” added Chikunguru.

This comes as Tongaat’s Zimbabwe sugar operations’ operating profit for the half-year ended September 2014 was $32 million compared to $23 million recorded in the prior period.

Peter Staude, the group’s chief executive said the period saw higher sales volumes, mainly due to improved local market protection (tariffs and import licences) implemented in April 2014.

Staude noted that the Zimbabwe sugar operations were expected to decrease in sugar production to between 440 000 tonnes and 475 000 tonnes for the full year compared to 488 000 tonnes in 2014 “mainly as a consequence of no cane being diverted from the independent ethanol plant at Chisumbanje (39 000 tonnes sugar equivalent in the prior year) and after experiencing the impact of low dam levels for irrigation at the end of 2013, which only recovered in early 2014.”

Comments (3)

so these people are reaping poor already cash squeezed Zimbos, an operating profit of $32m against prior year of $23m? Something is wrong here no wonder sugar from Brazil is cheaper in the shops than the producer prices in Zim. Wake up or globalization will leave you out of business unless the government continues to protect you greedy businesses. Which is the problem with our country and therefore affecting executives capacity and ability to think outside the box. Hameno shuwa!!!!

Moses - 20 January 2015

So you are happy if a company makes a loss or if a company does not improve financially. The question which you should have asked is if their selling price is at parity with or close to the Brazilian imported sugar. Or another objective way of looking at it is, how much return are they making given their production costs. As far as i know, if the government institutes a protection policy, it balances two sides, the poor man in the street as well ensuring that the local company does not succumb to unfair trade tactics like dumping substandard goods into our market for close to nothing. Well done Tongaat for such an impressive performance for the period under review. If every other company in Zim was posting such results, surely our situation as a country will have been even better. Thumps up to govt for identifying and supporting those sectors/industries that are still running and capable of producing and satisfying the national demand. Having excess to export is simply an icing on top of the cake. Thus the thrust of ZIMASSET, together we will turn around this economy.

Chikaidos - 21 January 2015

This Moses guy is truly a worrying person. Firstly that you could just jump to a conclusion of foul play without even looking at their finacial statements shows either little understanding of business, shallowness or both. If you did research you would know that the issue of better mechanization, government subsidies and labour costs is what makes Brazilian sugar cheaper to produce than ours. You would prefer that companies make losses to satisfy your suspicious mind? Profits are what companies use to improve their equipment etc until they can compete fairly so please applaud a good thing when you see one

Sam - 22 January 2015

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