Zambia Sugar Production Capacity To Double By 2016 As Demand Grows In Southern Africa

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Zambia Sugar Plc (LUSE:ZSUG), a company involved with cane growing and sugar production in the country, has recently announced that it will double its production capacity in the period 2016/2017 to tap the growing demand from Southern Africa.

In the six months ending September, 2015, Zambia Sugar has sold over 170 tonnes in the domestic market and exported approximately 159,000 tonnes to Southern Africa yielding to ZMW 1,067 million in revenues up from ZMW 965 million in the same period in 2014.

These production levels mean that the company will exceed its production capacity of 450,000 tonnes per annum, this is why a refinery expansion and product alignment project is being developed and will be ready for commissioning in the period 2016/2017, explained Zambia Sugar Head of Corporate Affairs and Communication, Mr. Japhet Banda.

According to Zambia Sugar Managing Director Rabecca Katowa, the project will double the company’s production capacity to tap the growing demand in Southern Africa that have been boosted by the development of good partnerships with customers, despite the current sector’s challenges.

The Zambian Kwacha’s (ZMW) depreciation heavily increased cost of imports, low water levels in the Kafue River affected irrigation at sugar cane plantations and electricity outages affected production, added Mr. Banda.

Even though these challenges made Zambia Sugar not to start production at the beginning of April, 2015, but after the second week due to unseasonal rainfall, the company stabilized operations to reach record production and boost operating profit by 21% thanks to an increase on sales of 9% driven by stronger domestic demand.

The company expects domestic and regional demand to remain favourable towards the end of the year to support sales since demand from USA and Europe is expected to fall due to the current surplus of sugar stocks that will affect the group’s overall exports and reduce it below 2014 levels of 1,284,174 tonnes.

Zambia’s sugar subsector accounts for almost 4% of the country’s GDP and 6% of total exports generating approximately USD 45 million in revenues per annum in the last five years up from an average of USD 25 million per annum in the 90s.

Southern African demand account for approximately 60% of the total imports by the African continent estimated at USD 6.31 billion in 2013 and representing 19% of global imports according to the Massachusetts Institute of Technology (MIT).

Zambia covers most of its sugar demand with domestic production since it merely imports 35,250 tonnes per annum totaling USD 2.25 million and representing less than 0.1% of the total imported to Africa.