ZAMBIA sugar exports to EU on the increases

Exports of sugar from Zambia Sugar to the European Union (EU) have increased from 30 000 to 135 000 tonnes following the removal of the quota trading system.

The commissioning of the K1 trillion Nakambala Sugar Estate Expansion Project has resulted in increased production by 100 percent.  The expansion , that started in April 2007, included upgrading of the existing factory, construction of roads and canals as well as planting sugarcane on over 10 000  hectares of additional land.

Beginning April 1, 2009, the factory commenced full production from the previous 246 000 tonnes to 440 000 tonnes with 135 000 tonnes being exported to the European market. 130 000 tonnes will be for the Zambian market while 120 000 tonnes will cater for the booming regional markets.

“Our  exports to the EU are expected to increase to around 200 000 tonnes in about three years while production capacity of the plant will rise to 465 000 tonnes,” said Zambia Sugar’s corporate affairs manager Lovemore Sievu.

Zambia Sugar in November 2009 slashed its output forecast for the year to March 2010 to 350 000 tonnes from 420 000 tonnes due to excessive rains. Offseason rains in the early part of the growing period negatively impacted on sugar production, although it would still be higher than ever before.

The expansion project was primarily based on the trading regime change in the European market,  growth in regional markets such as the Democratic Republic of Congo (DRC) and also the diversification in the bio fuel sub sector with the need to be self-reliant in the supply of electricity.

Under the Everything But Arms (EBA), the EU has given African, Caribbean and Pacific (ACP) countries duty free and quota free access to the European markets. With the coming of the Economic Partnership Agreements (EPAs), the quota system will be removed and countries will export whatever tonnage of commodities they can supply.

With the removal of the quotas in the EU markets, foreign exchange earnings for the country will increase. Growth in regional markets is also envisaged.

It is focused that lower prices of EU sugar exports, which became effective last October following new EU sugar market reforms, would be offset by increased market access since Zambia was now allowed duty free and quota free entry into the lucrative market.

And Zambia Sugar has stopped using electricity from the Zambia Electricity Supply Corporation (ZESCO) national grid following the installation of the 160-tonne per hour boiler and power plant that is turning  steam into electrical energy to produce 30 mega watts of power. This is supplementing the previously existing  10 mega watts  generation set. The company which is currently self-sufficient in energy and power has the capacity to internally deal with any surge in electricity demand.

“We get the energy from the residue for cane after we have extracted the sugar. The estate consumption for irrigation load peaks at about 25 megawatts while the expanded factory requires a few more megawatts of power. The installed electrical generating capacity on site is 40 megawatts. The factory uses about 13 to 14 megawatts and we can now essentially generate our own power requirements and that effectively reduces the demand on ZESCO to produce the extra 25 megawatts. This essentially puts 25 megawatts of power into the national grid,” managing director Steve Langton pointed out.

The 100 percent increase in production will result in the creation of 10 000 jobs, including the outgrower scheme.

The company has experienced start-up problems after the commissioning of the second phase of the expansion at the Nakambala factory in April 2009 but most of these drawbacks have been addressed.

Meanwhile, Zambia Sugar Plc and Zambeef are pleased to announce the completion of the sale of 85.73% of shares in Nanga PLC.

Nanga PLC previously held the ownership of 9 800 hectares of agricultural farm land in Mazabuka, Southern Zambia, of which 2 200 hectares are planted, primarily with sugar cane.

Zambeef, the controlling shareholders of Nanga Farms, had elected to sell their stake to focus on their core businesses. Zambeef is a leading Lusaka Stock Exchange (LuSE) listed company involved in primary agricultural and agri processing. Zambeef is one of the largest and successful agribusinesses in Zambia and the region involved in the production , processing, distribution and retailing of beef, chicken, pork, eggs, milk, dairy products, edible oils and bread throughout Zambia and West Africa. The company is also one of the largest irrigated cropping operations in AFRICA.

Zambia Sugar chose to buy the stake with a view to secure the long term supply of sugar cane for its expanded sugar refinery in Mazabuka. It is envisaged that a further stake in the  farm will be sold to a consortium of indigenous investors, in line with the country’s citizen empowerment policies. Zambia Sugar, established in pre independence era started operating from the Nakambala Estate in 1966. It is the premier agricultural enterprise in Zambia with a consistent history of growth, innovation, renewal and commitment to its customers and stakeholders. It has a well renowned outgrower scheme within Sub-Saharan Africa. Zambia Sugar is a bluechip company  with its controlling shareholder, Illovo Sugar of South Africa, significantly expanding their sugar production activities outside of South Africa, and specifically in Zambia.

The expansion that has been completed has made Nakambala Mill the second largest milling operation in Africa. The Nanga Farm sale is a landmark deal in Zambia as it brings together some of the leading players in agriculture, with funding provided by one of the leading banks in Zambia, Zanaco , which is benefitting from credit support from Rabobank, a global leader in food and agribusiness.

Sugarcane is also grown and processed by Kalungwishi Sugar Estates in Kasama, Northern Province and Consolidated Farming Limited (Kafue Sugar) on the outskirts of Lusaka.  That the sugar industry is set to grow substantially in coming years is a fact, given the diversification into the production of bio fuel and other downstream products. With Zambia’s vast arable land, opportunities for investment into this sub sector are extensive.