Sugar industry adopts protectionist approach
THE country’s sugar industry has adopted a protectionist approach to shield the local market from speculative trade and illegal exports to neighbouring countries.
Giant sugar producer, Tongaat Hulett, revealed the strategy in its latest trading update for the quarter ended 31 December 2020, stating that the industry’s marketing focus remains in ensuring fulfilment of local market requirements and growing export sales in regional premium markets to generate more foreign currency.
It said total industry sugar sales into the domestic market for the period under review were 259 000 tonnes, reflecting a three percent decrease from 266 000 tonnes achieved in 2019.
“This was due to deliberate measures taken by the industry during the first quarter of the financial year to minimise speculative trade and illegal exports to neighbouring countries on account of then existing currency and pricing distortions,” said Tongaat.
“The measures were successful, as sugar has since been readily available on the formal market, including during the peak demand festive season,” said the company.
Following the return to the foreign currency and local dollar pricing regime, the company is trading in both local and foreign currencies on the domestic market. Industry export sales recorded a 45 percent growth to 97 000 tonnes compared to 2019 volumes of 67 000 tonnes for the nine months.
This was despite a temporary suspension of sugar imports by the Kenyan government in June 2020.
Tongaat Hulett said the above-normal rainfall experienced to date, has significantly enhanced water security for the industry.
“With Tugwi-Mukosi Dam spilling for the first time since its commissioning in May 2017, and Lake Mutirikwi at over 60 percent of its capacity, 75 percent of the sugar industry’s irrigated cane area, is adequately covered for at least three seasons (at normal water duty).
“With the rainfall season forecast to continue until the end of March, Lake Mutirikwi is likely to impound more water, thereby further improving industry water security,” said the company.
As a consequence, the firm said total industry sugar production for the forthcoming 2021/22 production season is forecast to increase on the back of projected improvements in yields, cane quality and milling efficiencies.
“Efforts to maximise sugar production through yield improvement initiatives on both company-owned and private farmer-owned canefields are on-going, with special focus on strategic partnerships to rehabilitate all derelict and low yielding private farmer land to above the break-even yield of 70 tonnes per hectare,” said the sugar producer.
Meanwhile, Tongaat Hulett said the relative stability of prices attributable to the new foreign currency auction system has improved business confidence during the last quarter of 2020.
“The resurgence of Covid-19 is, however, likely to result in significant disruptions to business activity in key economic sectors, well into the foreseeable future,” it said. —chronicles.c.zw
