Zambia Sugar maintains grip on high production

THE latest financial results released by Zambia Sugar plc brought to light an improved performance by the Illovo owned sugar producing company.

The Mazabuka based firm set the pace for an improved record in production sales and exports among others.

The company recorded sugar production of 385 000 tonnes, the best ever for the country which consumes less than a third of that. This shows how a blend of aggression, market sourcing and raising the bar on the quality of a product can bring to a company and the Zambian economy.


Right from planting a cane of sugar in Mazabuka up to the shelves either in Zambia or Europe, Zambia Sugar’s style is a class act that could well be an indicator of the positive trends in the Zambian economy.

A highlight from all performance has been the increased export into the region and the European Union (EU) market where a third of the sugar the company produced went to.

The European market, according to Zambian Sugar plc Country Operations Director Stanley Munsamy presents enormous potential that the Zambian Sugar can exploit further.

A more open European Union market for Zambia’s sugar exports is creating new investment and jobs as well as increasing the country’s export receipts.

Since last year, the duty and quota-free market in the EU keeps ushering in new investment opportunities for sugar in the country’s huge arable land to supply new markets and new industries.

Five European countries are receiving the Zambian sugar including England, Belgium and the Scandinavian.

It is predicted that Zambia’s sugar industry will grow substantially in the coming years. This will mainly be driven by increased exports to both the EU and regional markets such as the vast Democratic Republic of Congo.

Zambia Sugar is embarking on a diversification programme to bio-fuels in its quest to grow even further.

Easier access to the EU market has come about through the phasing out of quotas under the EU’s Everything But Arms (EBA) initiative for Least Developed Countries (LDCs).

The 2001 EU trade incentive will give duty and quota free access to the EU market for the world’s 49 LDCs for all products apart from rice, sugar and bananas, deemed to be sensitive.

The remaining restrictions on sugar were eliminated on July 1, 2009 giving duty and quota free access to the EU market for Zambian sugar and that of other LDCs.

The quashing of the quota system by the EU opened a new window of opportunities for Zambian Sugar which it is exploiting with increased production of first of all cane sugar to more record levels and the expansion of the plant capacity.

The need to satisfy the EU and the regional market led by Congo DR meant the Mazabuka farm and factory needed massive investment.

The company needed to expand the Nakambala Sugar Estate and saw the commissioning of the K1 trillion Estate expansion project.

South African President Jacob Zuma, on an official visit to Zambia, commissioned the expansion, which raised output at the facility to 450,000 tonnes from less than 200,000 tonnes.

The expansion included the upgrading of an existing factory, construction of roads and canals as well as planting sugarcane on over 10,000 hectares of additional land in the form of Nanga Farm from Zambeef Products.

This purchase of Nanga has allowed for the growing of more sugar to come close to the increased capacity of the plant which presently is 450 000 tonnes.

The 100 percent increase in production will result in the creation of 10,000 jobs, including in the outgrower scheme where small-scale producers are encouraged to produce sugar.

“The benefits of the substantial capital investment in the sugar operations at Nakambala started to flow through during the past year.

This successful major expansion, which has increased annual sugar production capacity from around 200 000 tons to 450 000 tons, saw all previous production and sales records being exceeded,” Mr Munsamy said.

Record sugar production of 385 000 tonnes and a 23 percent rise in total sales increased revenue to K1 232 trillion, operating profit to K174 billion, compared to K908 billion and ZK159 billion respectively in the previous year.

Zambia Sugar spokesperson Lovemore Sievu said the agricultural operations, including Nanga Farms, produced 1.97 million tonnes of cane in the 2010/11 season, representing a 16 percent increase compared to the previous season.

“Combined with deliveries from Zambia Sugar’s supplying outgrowers, total cane throughput amounted to 3.1 million tons, representing a 19 percent increase compared to the previous year. This was another record for us,” Mr Sievu said.

The company milling operations were consolidated during the season, with the factory achieving its design milling capacity and improving on production efficiencies.

Sugar production increased to 385 000 tonnes from 315 000 tons in the previous season.

This represented a new sugar production record for Zambia Sugar and the most produced by a single factory in the Illovo group over the same period.

Despite the hitches brought by unseasonal rains, records were still broken and this presents an opportunity to do even better in the coming season.

Domestic sugar sales of 143 000 tonnes for the year reflected a 10 percent increase on the previous year. This was yet another record and thanks to a well-established marketing and distribution systems, sugar reached all markets across the country.

More recently market prices in the EU have increased, which will benefit the company going forward.

Regional market sales also increased significantly and benefited from higher prices aligned with the rise in sugar prices on the world market.

A record 233 000 tons of sugar were exported to EU and regional markets combined compared to 175 000 tons in the previous year.

Zambia Sugar is the largest employer in the Mazabuka and has an extensive indirect financial impact on the surrounding community through the payment of more than K190 billion in salaries, wages and benefits to employees.

The largest of these positive impacts is experienced by the company’s outgrowers whose total earnings for cane delivered to the Nakambala factory amounted to more than K200 billion in the 2010/11 season.

By supporting local business in the supply chain, Zambia Sugar indirectly attracts additional investment to the local economy.

The proportion of local spending is an important factor in contributing to the local economy and maintaining community relations.

Approximately 70 percent of the procurement budget is spent on Zambian suppliers Zambia Sugar has reduced costs by producing its own electricity and has thus stopped use of that provided Zesco.

The company faces competition from Kalungwishi Sugar Estates in Kasama and Kafue Sugar that grows from Consolidated Farming.

Kafue Sugar has gone into a partnership with National Milling whose brand name is now on the sugar.

The record performance by Zambia Sugar and the coming up of new sugar producers on the local market marks a new long-term confidence in the industry in Zambia.

source: times