Tongaat Hullet subsidiary Hippo Valley seeks alternative funding for the US$40m sugar cane project

ZIMBABWE – Hippo Valley Estates Limited, subsidiary of Tongaat Hulett is considering alternative sources of funding for the US$40 million Kilimanjaro Sugar Cane Project, seeking to develop virgin land into sugar cane plantations at Triangle and Hippo Valley estates in Chiredzi.

This is part of the firm’s drive to increase aggregate sugar output, while also empowering indigenous out-grower farmers who will be allocated plots on the nearly 3 300 hectares being developed, on a cost recovery basis.

When completed, Project Kilimanjaro is expected to contribute significantly to the industry target of full utilisation of installed milling capacity of 600 000 tonnes sugar by 2023/24.

This will position the country to be one of the most competitive sugar producers in the region and globally, reports the Herald.

Earlier in March, government guaranteed the project through a letter of security. Local funding for Project Kilimanjaro was initially coming from CBZ, CABS, ZB Bank and FBC.

The banks were expected to recoup their investments within five years, with the company managing farming operations until indigenous out-growers pay off their loans.

But they have been struggling to fund the project due to prevailing economic circumstances.

Hippo chairman Dan Marokane, said the company might have to take a phased approach in developing the project due to the emergent funding challenges.

“Work on the project is being 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 which will result in the project being progressed on a phased approach,” he said.

Currently a total of 2 700 hectares of virgin land has been cleared and ripped with 400 hectares already been put under cane.

The company reported a total revenue of ZWL3.7 billion (US$10.2m) for the year ended March 2020 from ZWL2.5 billion (US$6.9m) registered in the same period in 2019, an increase of 48% despite a 14% decrease in sales volumes.

This was mainly due to the industry successfully optimizing the market mix in the local market and better realisations from export markets.

As a result, profitability improved by 200% and 77% at adjusted EBITDA and operating profit levels respectively.

Net operating cash flow after interest, tax and working capital changes increased to ZWL378 million (US$1m) from ZWL280 million (US$773,600) of 2019 despite higher tax payments during the period under review.

Capital expenditure totalled ZWL47 million (US$129,800) of which ZWL40 million (US$110,500) was spent on root replanting.

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