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NRZ struggles hit Hippo Valley sugar production



SUGAR producer Hippo Valley recorded an 8% decline at 49 425 tonnes during the quarter ended June 2020 from 53 997 tonnes during the same period last year following a reduction in sugarcane milling caused by National Railways of Zimbabwe (NRZ) logistical challenges.

As such, total sugarcane milled was 10% down at 414 590 tonnes in the quarter under review from 459 938 tonnes during the same period last year.

“While the 2020/21 production season started on schedule on May 5 2020, cane deliveries to the mill were constrained in the initial weeks mainly on account of logistical challenges by NRZ which compromised the overall harvesting programme,” said Hippo Valley chairperson Dan Marokane.

“Steps are, however, being taken to ensure that all available cane is harvested in the current season. Mill performance for the first quarter was satisfactory with all the efficiency parameters being within the long-term averages for this time of the season.”

Marokane said domestic sugar demand remained relatively firm during the quarter with consumers stocking up ahead of winter and as a precaution in light of COVID-19 lockdowns.

While tonnes of sugar produced by the industry slid 8% to 101 063 from 109 607 tonnes prior year, total local industry sales volumes for the quarter amounted to 66 492 tonnes compared to 60 054 tonnes sold during the same period last year.

“Speculative trading by some traders capitalising on price distortions on account of exchange rate differentials also resulted in sugar being diverted from traditional retail chains to the informal market. The industry has since taken measures to minimise speculative trade with expectations that the currency auction system will stabilise the situation,” he said.

A seasonal total of 136 000 tonnes (prior year 89 000 tonnes) has been allocated to the export market of which 58% has already been contracted to date.

About 97 500 tonnes will be exported to Kenya and 18 198 tonnes to the United States, inclusive of a prior year reallocation of 4 672 tonnes.

The just-ended 2019/20 rainfall season was yet another poor one with very minimal inflows into the canefields’ water supply dams, presenting a key risk to the industry.

Although the industry has sufficient irrigation water to cover the current season, water conservation initiatives including reduction of water application rates to levels that are not a deterrent to normal crop growth have been instituted as a precautionary measure.

Total industry sugar production for the current year is estimated at between
445 000 and 455 000 tonnes, exceeding the prior year production of 441 000 tonnes, with the company’s share of production estimated at 50%.

The company said government authorities had assured the sugar producer that its application for a 99-year lease would be attended to with urgency, providing further confidence and stability to operations, adding that work on the 4 000 hectares out-grower cane development project in partnership with government and local banks (Project Kilimanjaro) was on-going with a total of 2 700 hectares of virgin land having been cleared and ripped, 466 hectares of which have been planted to sugarcane.

“During the first quarter ended June 30 2020, work on the project has been slowed down by delays in obtaining adequate funding from financial institutions due to the prevailing adverse economic environment. Alternative funding structures for the project are under consideration in consultation with government, which will result in the project being progressed on a phased approach,” Marokane said.

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