According to the sugar value chain competitiveness report, Zimbabwe has huge potential to grow the sugar sector into a formidable industry in the region provided certain complementary measures are taken to curb binding constraints in the sector, the National Competitiveness Commission (NCC) has indicated.
NCC sugar value chain competitiveness report launched in Harare on Thursday recommended complementary efforts from relevant stakeholders to bolster the competitiveness of the sector compared with regional peers.
Collaborative input from the Government, outgrower farmers, farmers –cum millers, service providers, and suppliers of inputs, has been cited as key in ensuring that some of the challenges are addressed.
High loan interest rates by local banks have been cited as some of the factors inhibiting the sugar value chain’s competitiveness compared to their regional counterparts.
According to the report, interests rates in the country range between 40 and 60 percent, and this is exacerbated by the fact that they are short-term loans.
Indications show that regional loans are long-term and interest rates range between 3.4 percent and 13.25 percent.
Specifically, South Africa’s interest rates are the lowest at 3.24 percent followed by Eswatini’s 5.49 percent while Zambia’s price stands at 8.5 percent. Among the regional peers, Mozambique has higher interest rates at 13.25 percent.
Consequently, sugar pricing by these countries is noticeably better than that of Zimbabwe, rendering the country uncompetitive when it comes to the pricing of the product.
Unsurprisingly in terms of sugar prices, the aforementioned regional countries are thrice competitive as compared to Zimbabwe.
In April 2021 Zimbabwean Government declared sugar as a strategic crop a development that dovetails well with vision 2030.
The sugar value chain competitiveness report that was launched in Harare also revealed that the intermittent supply of electricity had led players in the sugar manufacturing chain to rely on substitute energy sources like generators.
Critically, this is met by unrelenting challenges like perennial maintenance costs of diesel generators coupled with higher fuel costs compared to the regional average.
According to the findings of the report, Zimbabwe’s fuel prices are pegged around $1.30 per litre compared to the regional average where the commodity is obtainable at around US$0.70 per litre.
However, the total number of hectares designated for sugarcane has been growing steadily from 43,128 in 2015 to 46,000 hectares designated for the crop in 2021.
The period between 2015 and 2021 saw notable dips in hectarage under the crop with hectarage plummeting to 36,078 hectares and 40,251 hectares in 2019 and 2020 respectively.
Notably, private farmers’ (out growers) hectarage has been on the rise since 2017, gradually growing to 20 420 in the 2021 season (44 percent of total land put under sugarcane) from 16,972 hectares recorded in 2015.
Private farmers’ hectarage under sugarcane even reached a peak of 21,061 in 2018.
On part of the millers cum farmers, triangle had 12,420 hectarages under the crop which was the largest hectarage in the 2021 season followed by Hippo Valley’s 11,500 hectares and Mwenezana’s 1,840 hectares, and their combined hectarage translates to 56 percent, of the total land put under sugar in 2021.
Sugar value chain and GDP
While presenting the findings of the sugar value chain competitiveness report launch National Competitiveness Commission chief economist in charge of Domestic Competitiveness, Dumisani Sibanda, said Zimbabwe’s sugar sector had immense potential to contribute to the country’s Gross Domestic Product (GDP) if relevant authorities were to put heads together and counter barriers being encountered in the sector.
“The trade statistics indicate that if sugar productivity challenges are addressed, there is potential for the country to export more, as locally produced sugar becomes more competitive.
“Complementary effort from all relevant stakeholders including the Government, outgrower farmers, farmers –cum, millers, service providers and suppliers of inputs, is key in ensuring that binding constraints in the sugar industry sector are dealt with,” said Mr Sibanda.
According to the National Competitiveness Commission survey, 65 percent of the sugar produced in the country is for the domestic market and 35 percent is exported into the region, USA, and to European Union as raw sugar.
Mr. Sibanda indicated that sugar exports have been on the rise despite falling sugarcane yield, a position he suggested would be healthier if conditions on the ground are improved.
“I would like to highlight that exports value as of 2018-19 marketing year amounted to about US$62.8 million translating to 0.37 percent of the GDP.
“Ironically, despite the falling sugarcane yield, Zimbabwe’s sugar exports have been on an upward trend increasing by about 30 percent from US$58.1 million in 2016 to US$75.5 million in 2020,” he said.
According to the Reserve Bank of Zimbabwe (RBZ), the Zimbabwe Sugar Sales Company exported US$10.2 million worth of raw sugar between January to July 2021.
NCC, however, recommended macroeconomic stability as a prerequisite for the sector’s growth and urged the government to immediately address the issue of high operating costs which is associated with the current macroeconomic environment.