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Tongaat Hulett’s sugar operations in Zimbabwe comprise the wholly owned Triangle Sugar operation and its 50,3 percent holding in Hippo Valley Estates.
The Zimbabwe operations farm 29 000 hectares with a demonstrated potential to produce in excess of 3,4 million tons of sugar cane annually. Private growers have been allocated a further 15 800 hectares all of which were previously under cane and which have the demonstrated potential to produce in excess of 1,5 million tons of cane annually.
The Triangle and Hippo Valley Estates sugar mills have a combined installed milling capacity to crush in excess of 4,8 million tons of cane annually and produce over 600 000 tons of sugar. Refining capacity is 150 000 tons per annum.
Sugar production in Zimbabwe in 2009 amounted to 259 000 tons (2008: 298 000 tons). The situation that prevailed in Zimbabwe in 2008 had a negative impact on the 2009 harvest and sugar production levels.
Since February 2009, sales to the domestic market have been conducted in US dollars at prices in line with regional prices and amounted to 188 000 tons as demand in the domestic economy continued to improve. A further 146 000 tons of sugar production was exported to the EU.
The fermentation and distillation capacity to produce either alcohol or fuel grade ethanol is rated at 27 million litres per annum and was re-commissioned during January 2010. Clarity on the Zimbabwean blending policy is still required to facilitate sales of fuel grade ethanol in the local market. In 2010/11 the plant is expected to produce 23,4 million litres of potable and industrial grade ethanol with 75 percent being exported to South Africa and the balance sold domestically and regionally.
The pace of integration of Triangle with Hippo Valley Estates and the realisation of rationalisation and synergistic benefits in order to improve cost competitiveness has increased as the business environment normalises. Initiatives include the alignment of policies, sugar marketing and branding, rationalisation of strategic stockholdings, integration of medical schemes and the sharing of skills and resources through joint management services. Procurement has a key role to play in re-establishing the Zimbabwe operations as a low cost producer by international standards and is an area that is receiving particular emphasis as the economy adjusts from a hyper-inflationary Zimbabwe dollar environment to a more predictable US dollar denominated economy.
The improved macroeconomic conditions that have prevailed in Zimbabwe since the beginning of 2009 are facilitating the escalation of actions and programmes focused on restoring cane and sugar production to 4,8 million and 600 000 tons, respectively.
These plans include upgrading the two sugar mills in order to restore reliability and sugar recoveries, cane yield improvement programmes on the company farmed and private grower estates and plans to restore cane production over the next three to four years on 11 100 hectares of private grower land.
Integral to the plans to restore private grower cane production is the continued access to the EU’s Adaption Funding made available to qualifying ACP countries following the reform of the EU’s sugar regime and the resultant decrease in the value of the EU as a preferentially priced market. In the case of Zimbabwe, €45 million has been allocated, most of which will be channelled through the Canelands Trust that has been set up by the company, with oversight provided by the EU and the government of Zimbabwe.
The first two tranches of €2,7 million and €6,5 million have been made available with the first tranche being used to establish the administrative capability of the project. The focus of the second tranche is the re-establishment in 2010/11 of 1 200 hectares of private grower land in the Chipwa and Mpapa regions.
A third tranche of €13 million that will fund the re-establishment of 7 000 hectares has been provided for by the EU and is conditional upon progress being made on Zimbabwe’s land audit, as provided for in the Global Political Agreement signed in 2008. The focus of attention in any land audit will be on land administration, land tenure, compensation and dispute resolution.
The improved macroeconomic environment and the fact that realisations for sugar sold on the domestic market in US dollars are at levels in line with regional prices has improved the viability of cane farming in Zimbabwe to the levels commensurate with those expected from high yielding irrigated cane land.
Triangle and Hippo Valley are escalating the provision of extension services and support programmes to all qualifying private growers including extensive technical training and the sourcing of key inputs. The combined effects of the rehabilitation activities outlined above are expected to result in a 20 percent increase in cane crushed and a 27 percent increase in sugar production to in excess of 330 000 tons in 2010/11.
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