Listed sugar producer, Hippo Valley Estates Limited, is considering alternative sources of funding for the US$40 million Kilimanjaro Sugar Cane Project.
Through the project, the company is looking to develop virgin land into sugar cane plantations at Triangle and Hippo Valley estates in Chiredzi. This is part of the firm’s drive to increase aggregate sugar output, while also empowering indigenous out-grower farmers who will be allocated plots on the nearly 3 300 hectares being developed on a cost recovery basis.
When completed, Project Kilimanjaro is expected to contribute significantly to the industry target of full utilisation of installed milling capacity of 600 000 tonnes sugar by 2023/24, positioning the country to be one of the most competitive sugar producers in the region and globally.
But local banks have been struggling to fund the project due to prevailing economic circumstances.
Hippo chairman Dan Marokane, said the company might have to take a phased approach in developing the project due to the emergent funding challenges.
“Work on the 4 000 hectares out-grower cane development project in partnership with Government and local banks (Project Kilimanjaro) is on-going with a total of 2 700 hectares of virgin land having been cleared and ripped, 400 hectares of which have been planted to sugarcane,” he said.
“Work on the project is being slowed down by delays in obtaining adequate funding from financial institutions due to the prevailing adverse economic environment.
“Alternative funding structures for the project are under consideration which will result in the project being progressed on a phased approach.”
Earlier in March, Government guaranteed the project through a letter of security.
Local funding for Project Kilimanjaro was initially coming from CBZ, CABS, ZB Bank and FBC.
And the banks were expected to recoup their investments within five years, with the company managing farming operations until indigenous out-growers pay off their loans.
Zimbabwe’s sugar production for the 2020/21 financial year is forecast to be between 440 000 and 455 000 tons of sugar with approximately 35 percent being sold into the export market.
Hippo’s share of industry sugar production is forecast to be 50 percent.
Notwithstanding the disruptions caused by the coronavirus (Covid-19) pandemic, at least over the last three months, Hippo expects sugar output to remain in line with initial targets.
“With the sugar milling season having begun on schedule, sugar production is unlikely to be impacted by the Covid-19 pandemic.
“The potential impact on the sugar industry and the company will continue to be closely monitored,” said the chairman.
“The industry is alert to potential export opportunities into Europe as global economies seek to recover from the pandemic.”
For the year to December 31, 2019, Hippo’s sugar production was down 11 percent to 212 004 tonnes from 238 965 tonnes previously.
Sugar sales were down 14 percent to 413 000 tonnes from 483 000 tonnes in the prior year comparable.
But revenue jumped 48 percent to $3,7 billion from $2,5 billion in 2019, which drove the company’s profitability during the period under review.