Zim’s sugar industry is not competitive: report

Zimbabwe’s sugar industry is hampered by a monopoly and a combination of policies and value chain inefficiencies that have made locally produced sugar and related products uncompetitive for the export market, according to the report on sugar value chain from the National Competitiveness Commission (NCC).

Currently, the price of locally produced sugar averages US$738 per tonne, above the SADC average of US$500.

The NCC interrogates the value chains of strategic sectors to understand cost drivers in hopes of making local production competitive.

According to the report, the sugar industry is a monopoly with Hippo Valley’s Tongat Hullet subsidiaries, Triangle Limited, Zimbabwe Sugar Sales and Fuel Ethanol Company of Zimbabwe dominating all levels of the sugar value chain.

In sugarcane crushing, for example, Zimbabwe has only two crushing companies, Hippo Valley and Triangle Limited, both of which are affiliated with Tongaat Hullet and they dictate the revenue division ratio (DOP) for the crushing of the cane of the producers.

Smallholders have long been pushing for the current ratio of 77:23 to be revised in their favour, arguing that the 23% of revenue going to millers remains too high a premium and affects viability.

This situation is aggravated by the fact that the DOP ratio only takes into account sugar sales whereas in other countries the DOP ratio also takes into account other purchasing products such as molasses.

“Monopoly has its own challenges. In Zimbabwe we only have 2 sugar mills and are affiliated with Tongaat Hullet. In other countries like Egypt, which has 15 companies in the sugar industry, offers 15 mills and competitive prices,” said Dumisani Sibanda, Chief National Competitiveness Economist of the NCC at the launch of the report this morning. .

Zimbabwe is one of 88 sugar producing countries in the world and is ranked 17and worldwide, 9and in Africa and 4and in the SADC region.

However, the sector faces several challenges that continue to drive up production costs.

The report notes that high interest rates in the domestic loan market are problematic, with rates varying between 40 and 60 percent compared to 13.2 percent in Mozambique, 8.5 percent in Zambia and 3.4 percent in South Africa. South.

The report further highlighted outdated and dilapidated canal infrastructure used by Chiredzi outgrowers to irrigate their crops, which resulted in lower yield per hectare.

The report also established that Zimbabwe is one of nine countries in the world that fortifies its sugar with vitamin A, which is an additional cost.

“The cost of vitamin A is US$9-10 per ton. So that’s an additional cost on production that policymakers should really look at,” said Douglas Muzimba, NCC’s chief international competitiveness economist.

Other non-competitive factors identified by the report include an inefficient rail transport system, higher fuel cost than the regional average, power outages and the limited number of milling centers resulting in longer distances traveled. by outgrowers to access milling services.

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