The influx of cheap imported sugar is threatening the viability of listed sugar processor, starafricacorporation, board chairman Rungamo Mbire has said.
It follows the government’s suspension of duties on imported goods, including sugar, to address market shortages.
According to Mbire, the government’s decision has had unintended consequences on the company’s viability. The starafricacorporation’s products faced increased competition from low-cost imported sugar from Brazil, South Africa, and Eswatini. Due to this, Starafricacorporation, which had previously reported a profit of ZWL$2.33bn for the 12-month period ending March 31, 2023, suffered a loss of ZWL$2.04bn in the period under review.
In a statement accompanying results, Mbire warned that duty-free sugar imports could upset potential investors. “During the year ended March 31 2023, sales volumes of granulated sugar produced by Goldstar Sugars were stagnant, having been 82,500 tonnes sold in the prior year to 82,321 tonnes. This was on the back of pressure from imports after promulgation of Statutory Instrument 98 of 2022.
”The company looks forward to the government reinstating duty on imported sugar, a development which will impact positively on the local sugar industry,” Mbire said.
According to him, as a result, production volumes decreased by 6% to 77,270 tonnes in the reviewed period from 82,399 tonnes the year before.
Cheap imports have also rendered new sugar producers irrelevant because they cannot compete with the external players due to high production costs.
Industry experts contend that government’s decision to permit the duty-free import of sugar violated legal restrictions on the importation of fortified foods, which are based on World Health Organization (WHO) recommendations, in addition to the viability of operations.
They thought it odd that the government would make decisions like the ones it made earlier this year, which go against clear economic benefits and recommendations made by international organizations like the WHO, without fully considering the socioeconomic ramifications.
Sugar is one of many foods that should be fortified with Vitamin A at source in order to combat certain common diseases that are spread throughout the world and to prevent epidemics. Other foods that should be fortified include mealie meal, flour, cooking oil, and salt.
Despite the pressure from imports, Zimbabwe has been a net exporter of sugar to the European Union and United States of America.
According to official statistics, at the beginning of August 2023, the country shipped 25 000 metric tonnes of sugar to the United Kingdom and Northern Ireland. Local producers are also starting to gain significant market share in Kenya and the Democratic Republic of the Congo, but major obstacles in this area have been viability issues brought on by the low-cost imports.
Revenue for starafricacorporation went up 30% in the period under review to ZWL$50.1bn from ZWL$38.5bn reported in the prior comparative period and the improvement was largely attributable to strong demand for all the group’s products during the year under review.
But the group’s operating profit shrunk by 93% to ZWL$0.4bn from ZWL$5bn in the prior year due to a direct result of increases in raw sugar prices and operating costs in real terms.
Mbire added that the business would tighten its cost-cutting measures going forward in an effort to raise the operating profitability of both the refinery and the sugar specialties division.