High bank charges stifle the sugar industry

the herald

business journalist

According to a report by the National Competitiveness Commission (NCC), HIGH interest rates charged by local banks on loans are hampering the competitiveness of actors in the sugar industry value chain.

NCC’s Sugar Value Chain Competitiveness Report, launched Thursday in Harare, has since recommended measures to boost the competitiveness of this strategically key sector.

The collaborative contribution of government, outgrowers, farmers and millers, service providers and input suppliers was cited as key to addressing the challenges.

According to the report, bank interest rates in Zimbabwe fluctuate between 40 and 60% and this situation is exacerbated by the fact that these are short-term loans.

The results of the survey established that loans in the countries of the region were generally long-term while interest varied between 3.4% and 13.25% per annum.

Notably, lending rates in South Africa are the lowest at 3.24% followed by Eswatini at 5.49% and Zambia where money costs 8.5% per annum.

Therefore, the price of sugar in the region is significantly better than that of Zimbabwe, which makes the country uncompetitive when it comes to the price of the product.

Unsurprisingly, in terms of sugar prices, the aforementioned regional countries are considered to be three times more competitive compared to Zimbabwe.

In April 2021, the government of Zimbabwe declared sugar a strategic crop, a development that aligns with the aspirations of Vision 2030, by which time the country should be an upper-middle-income economy.

The report found that the intermittent supply of electricity has led players in the sugar manufacturing chain to rely on expensive alternative energy sources like generators.

This proved to be fraught with endless pitfalls, such as high maintenance costs coupled with expensive fuel to power the generators compared to the regional average.

According to the research findings, fuel prices in Zimbabwe are set at around US$1.30 per liter compared to the regional average where the product costs around US$0.70 per litre.

On a positive note, the land designated for sugar cane in Zimbabwe has steadily increased from 43,128 hectares in 2015 to 46,000 hectares designated for cultivation in 2021.

The period between 2015 and 2021, however, saw notable declines in hectares under cultivation after falling to 36,078 ha and 40,251 ha in 2019 and 2020, respectively.

In particular, the area of ​​private farmers (small producers) has been increasing since 2017, gradually increasing to 20,420 hectares during the 2021 season (44% of the total land devoted to sugarcane) against 16,972 hectares recorded in 2015.

Private farmers’ land under sugarcane cultivation even peaked at 21,061 in 2018.

On part of the millers and farmers, the triangle had 12,420 hectares under cultivation, which was the largest hectare of the 2021 season, followed by 11,500 hectares in Hippo Valley and 1,840 hectares in Mwenezana, and their combined square footage translates to 56 percent of the total. land put under sugar in 2021.

Presenting the findings, NCC (Domestic Competitiveness) Chief Economist Dumisani Sibanda said Zimbabwe’s sugar sector has immense potential to contribute to the country’s economy if the relevant authorities can come together and counter the obstacles encountered in the sector.

“Trade statistics indicate that if sugar productivity issues are resolved, the country has the potential to export more, as locally produced sugar becomes more competitive. Complementary efforts of all relevant stakeholders, including government, outgrowers, farmers, millers, service providers and input suppliers, are essential to ensure compliance with binding constraints in the sector. of the sugar industry,” said Mr. Sibanda.

According to the NCC survey, 65% of the sugar produced in Zimbabwe is destined for the domestic market while the rest is exported to the region, the United States and the European Union in the form of raw sugar.

Mr Sibanda said sugar exports had increased despite the decline in sugar cane yield, which could be improved if conditions on the ground improve through stakeholder engagement.

“I would like to point out that the export value as of the 2018-2019 marketing year was around $62.8 million or 0.37% of GDP. Ironically, despite the decline in sugar cane yield, Zimbabwe’s sugar exports have been on an upward trend, increasing by around 30% from $58.1 million in 2016 to $75.5 million. dollars in 2020,” he said.

According to the Reserve Bank of Zimbabwe (RBZ), the Zimbabwe Sugar Sales Company exported $10.2 million worth of raw sugar between January and July 2021.

The NCC said macroeconomic stability was a prerequisite for the sector’s growth and urged the government to immediately address the problem of high operating costs.

Rachel J. Bradford