Sugar continues to be diverted to informal market

Mandla Tshuma7th August 2020

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Sugar continues to be diverted to the informal market at a time when the country is under Covid-19-induced lockdown, the biggest player in that industry, Hippo Valley Estates Limited, has disclosed.

In a latest trading update for the three months ended 30 June 2020, the sugar producer said speculative behaviour by some traders in the market was to blame for the diverting of the commodity into the parallel market.

“Speculative trading by some traders capitalising on pricing distortions on account of exchange rate differentials also resulted in sugar being diverted from traditional retail chains to the informal market,” said the group.
“The industry has since taken measures to minimize speculative trade with expectations that the new currency auction system will stabilize the situation. The demand for sugar in the domestic market remained relatively firm during the quarter period with consumers stocking up ahead of winter and as a precaution in light of Covid-19.”

Hippo Valley Estates said total local industry sales volumes for the quarter amounted to 66 492 tonnes compared to 60 054 tonnes sold during the same period last year.

“Export sales to date of 32 080 tonnes were achieved during the quarter compared to 14 587 tonnes over the same period in prior year, benefitting from increased sales into Kenya,” said the group.

“A season total of 136 000 tonnes (prior year 89 000 tonnes) has been allocated to the export market of which 58% has already been contracted to date. A significant volume of 97 500 tonnes will be exported to Kenya and 18 198 tons to the United States (inclusive of a prior year reallocation of 4 672 tonnes).”

Meanwhile, the company said while the 2020/21 production season started on schedule on 5 May 2020, cane deliveries to the mill were constrained in the initial weeks mainly on account of logistical challenges by the National Railways of Zimbabwe (NRZ) which compromised the overall harvesting programme.

“Steps are however being taken to ensure that all available cane is harvested in the current season,” explained the group.

“Mill performance for the first quarter was satisfactory with all the efficiency parameters being within the long-term averages for this time of the season.”