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DEMAND for sugar is expected to grow by an average 30 percent in Southern and Eastern Africa in the next six years — exerting pressure on the already suppressed industrial capacity amid changes in climate conditions and low sugar cane production. According to the Zimbabwe Stock Exchange (ZSE)-listed concern, Hippo Valley Estates Limited, a subsidiary of Tongaat Hulett, there is room for growth in the sugar industry, which is presently dominated by a few players.

The Chiredzi-based sugarcane growing and milling company stated in its report for the year ended March 31, 2015, that more farmers need to be roped into the sugar industry to increase sugarcane production and milling capacity.

The giant firm recorded a five percent decrease in sugar production to 228,000 tons compared to 239,000 tons in the prior year due to low cane deliveries from independent producers and the negative impact of low dam levels for irrigation at the end of 2013.

Hippo Valley has said its target was to attain installed capacity of 640,000 tons per annum.

“There are predictions for sugar demand growth in Southern and Eastern Africa of some 30 percent over the next six years. The current surplus global stock levels have also been putting pressure on local and regional prices as well as the EU market, amplified by the EU market reforms,” company secretary Bigboy Shava said in a statement accompanying the company’s abridged audited financial report.

“The industry is steadily shifting export sales from the EU to regional deficit markets in addition to focusing on capturing and growing local market sales.”

The company further noted the sustainability of farmers in most parts of the world is under significant pressure given the low current world prices and taking into account the substantial input cost increases over the past decade.

“This, together with the possible impact of variable weather conditions is likely to have an effect on sugar production levels,” added Shava.

However, global sugar consumption is expected to maintain an upward trend, at a rate of two percent per annum, with most of the growth coming from low per capita consumption in developing countries.

Banking its hopes on expeditious completion of the Tokwe Mukorsi Dam project, the company said it was pushing a vigorous sugar cane replanting programme as part of its outlook, aimed at restoring sugar production to installed milling capacity by 2018-19.

“The replanting programme will continue to gain momentum with sugar production expected to increase to installed capacity in the next four years.

“ In the face of variable weather conditions . . . it’s expected (Tokwe Mukorsi) would hold water during the coming seasons, thereby augmenting the current water sources and presenting new development opportunities for industry expansion,” said Shava.

The company also said it was working on a number of socio-economic initiatives in partnership with the government and local communities in developing sustainable private sugar cane farmers numbering about 1,023 towards increasing cane harvest supply of up to 1,900 tons from 19,270 hectares.

The initiative is set to create more job opportunities to surrounding communities.

Meanwhile, Hippo Valley’s revenue for the year under review amounted to $146.8 million, an eight percent increase from $136.1 million recorded in the prior year.

Operating profit and net profit for the year amounted to $16.2 million and $7.3 million compared to $19 million and $9 million in the prior year, respectively.

The results were attributed to a significant recovery in local market sales volumes at higher returns compared to realisations from the depressed EU markets.