Local demand to spur sugar production at Hippo Valley

Published: 07 November 2013

Growing sugar demand in the country is expected to offset the planned phasing - out of export quotas to the European Union (EU) by Tongaat Hulett's Zimbabwean unit, Hippo Valley.

The country's per-capita sugar consumption is estimated at 24.6kg this year, with experts saying consumption patterns are largely "influenced by availability" rather than by price.

Tongaat Hulett's two units in Zimbabwe, Hippo Valley and Triangle Sugar Corporation, are significant contributors to its revenues. Hippo Valley's after-tax profits for the year to the end of March declined to $13.6-million from $20.9-million.

Domestic sales grew to 258,000 metric tonnes, up from 247,000 tonnes last year, while 202,000 tonnes were exported to the EU under preferential market arrangements existing at the time. Now there are reports that the export quotas to the EU may be phased out.

Tongaat Hulett is facing increased pressure from the Government to comply speedily with its indigenisation policy, which requires that foreign groups give u[ majority shares in local units to indigenous Zimbabweans.

However, most foreign companies are banking on what some see as a softening of this approach by new Indigenisation Minister Francis Nhema.

Analysts at Imara Africa Securities said they did not believe "there will be any significant interruptions to the operations of Hippo based on precedence set with other indigenous cases" in the country.

"Our expectations are for Hippo to eventually come up with an employee share ownership scheme and cede stakes in the company to community ownership schemes," the analysts said in a new report on Wednesday.

- Bdlive