The local sugar industry has experienced a notable setback, with a 14% decline in sales attributed to the surge in cheaper imports, a consequence of recent government policy initiatives, reported New Zimbabwe.
In May 2023, the government implemented Statutory Instrument 80 of 2023, which officially listed 14 essential commodities, including sugar, exempting them from customs duty for the subsequent six months. This move aimed to shield consumers from potential price hikes by retailers engaged in price hedging practices in anticipation of future exchange rate depreciation.
The policy shift has resulted in an uneven playing field, as imported sugar enjoys cost advantages over locally-produced sugar, including lower minimum wages and exemption from mandatory local fortification regulations. The majority of imported sugar originates from countries where government policies and subsidies support sugar production, further exacerbating the competitive disparity, as highlighted by the industry.
To offset the resultant revenue losses and maintain operational sustainability, the local sugar company has strategically redirected sugar initially intended for the domestic market towards regional and international export markets. Despite the recent surge in world sugar prices, international sugar markets are residual markets for excess sugar, leading to lower prices compared to the domestic market.
Consequently, the industry witnessed a substantial 47% increase in export sales volumes, reaching 51,744 tons. This upturn can be attributed to a rise in the US$ quota allocation to 18,276 tons and the initiation of maiden exports to the United Kingdom, amounting to 25,000 tons. Notably, no sugar was sold in Kenya or Namibia during the past six months.
Despite a 4% dip in industry sales volumes, the company reported a commendable 76% increase in revenue in Zimbabwean dollar terms.
