ZIMBABWE –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.”