• Government has fixed the sugar cane purchase price at US$72.40 per tonne under Statutory Instrument 174 of 2026, overriding existing contractual prices for private growers
• Hippo Valley says Zimbabwe's previous US$71 cane price was already substantially above Kenya's US$42, while the 77% grower share of sugar proceeds exceeded regional benchmarks
• The new regulations introduce a payment deadline of the eighth day of the following month, increasing the importance of working-capital management for millers

Harare - Zimbabwe has fixed the sugar cane purchase price at US$72.40 per tonne, increasing procurement costs for sugar millers whose existing pricing arrangements have already been challenged by Hippo Valley Estates as uncompetitive against regional producers.

The new regulations, gazetted on October 30 under Statutory Instrument 174 of 2026, override private growers' existing cane purchase agreements and require millers to settle payments by the eighth day of the following month unless alternative terms are agreed in writing. The price represents a 1.97% increase from the previous US$71 benchmark, introducing an additional cost for processors at a time when Hippo Valley has been seeking reforms to cane pricing, revenue sharing and tax treatment to protect milling profitability.

The intervention follows a prolonged dispute between private growers and millers over the allocation of revenue generated by Zimbabwe's sugar industry. Government has established a statutory purchase price for cane supplied under Cane Purchase Agreements, providing growers with a defined payment benchmark. The regulations also create criminal penalties for non-compliance, including a level-five fine, imprisonment for up to six months or both, with directors and managers who knowingly participate in contraventions potentially facing personal liability.

The commercial implications extend beyond the modest increase from US$71. During an earlier interview with Equity Axis, Hippo Valley Estates Group Finance Director Tapera Masarakufa described Zimbabwe's cane pricing framework as significantly more expensive than comparable arrangements in regional sugar-producing countries. His concerns covered two mechanisms governing the relationship between growers and millers: the fixed Cane Purchase Agreement price and the Division of Proceeds applied under Cane Milling Agreements.

Under Cane Purchase Agreements, farmers sell their cane to millers at a predetermined price per tonne. Under Cane Milling Agreements, growers supply cane for processing and receive an agreed share of the resulting sugar proceeds, with millers retaining the balance for processing and associated commercial activities. Although the arrangements are commercially linked, they represent different contractual mechanisms and should not be treated as two separate payments automatically imposed on every tonne of cane.

Masarakufa identified Zimbabwe's 77% Division of Proceeds allocation to growers as unusually high compared with regional benchmarks. According to his comparison, Zambia's grower allocation fluctuates between 56% and 59%, while Eswatini's ranges from approximately 65% to 68%. Zimbabwe's arrangement leaves millers with 23% of the relevant sugar proceeds before the costs of processing and other applicable charges are considered.

The revenue allocation has remained contentious. Hippo Valley and Triangle challenged a proposed adjustment that would increase the growers' share to 80.5%, reducing the millers' allocation to 19.5%. The dispute became the subject of High Court proceedings over the methodology and authority underpinning the revised Division of Proceeds. The new statutory cane purchase price does not expressly settle that separate revenue-sharing dispute.

Hippo Valley's concerns also extend to the fixed cost of purchasing privately grown cane. Masarakufa cited Kenya's cane purchase price of approximately US$42 per tonne against Zimbabwe's previous US$71, a difference of US$29 per tonne. Under the newly prescribed US$72.40 rate, the difference rises to US$30.40, placing Zimbabwe's nominal purchase price approximately 72% above the Kenyan benchmark cited by management.

The regional comparison illustrates the miller's cost concern, although differences in irrigation, agricultural yields, labour, land tenure and production systems limit direct comparisons. Zimbabwe's Lowveld sugar production depends heavily on irrigation, while climatic conditions and cultivation methods differ across regional producers. A meaningful assessment of competitiveness therefore requires comparable costs per tonne of recoverable sugar rather than cane purchase prices alone.

Masarakufa also disputed the perception that private cane growers were receiving inadequate returns under the previous price. Drawing on Hippo Valley's experience cultivating its own cane and providing farming services to outgrowers, he estimated that producers operating plots of approximately 10 to 20 hectares incurred production costs of US$46 to US$51 per tonne.

Using those estimates, the newly prescribed US$72.40 price would provide a difference of US$21.40 to US$26.40 per tonne above cultivation costs. This represents an indicative gross margin of approximately 29.6% to 36.5% of the selling price before accounting for any expenses excluded from management's production-cost estimates.

The figures remain Hippo Valley's assessment and have not been independently established across the industry's diverse grower operations. Farmers face varying expenses for irrigation water, fertiliser, electricity, labour, equipment maintenance, finance and cane transportation. Actual profitability also depends on yields and the distance between farms and processing mills, meaning the financial position of a small outgrower may differ substantially from that of a larger commercial estate.

Evidence presented to Parliament during its examination of Zimbabwe's sugar value chain identified substantial pressures on growers, including high borrowing costs, imported fertiliser inputs and water charges. These conditions support the need for a transparent and independently verified production-cost framework before drawing conclusions about the adequacy of the new statutory price.

For millers, the financial effect can be calculated against the previous purchasing benchmark. Every 100,000 tonnes acquired at US$72.40 would cost US$7.24 million, compared with US$7.10 million at US$71, representing an additional US$140,000. The actual increase in Hippo Valley's expenditure will depend on the tonnes purchased under the affected agreements and the timing of the new price's application.

The impact becomes more significant alongside the tax pressures already identified by Hippo Valley. Masarakufa previously disclosed that the change in sugar's VAT treatment from zero-rated to exempt had imposed approximately US$7 million in additional annual costs through input VAT that could no longer be recovered. The tax change increases effective production expenses even where the physical quantity of inputs purchased remains unchanged.

Hippo Valley's published financial disclosures have also identified cane costs as a source of pressure on its milling division. Although the company has improved its overall earnings through stronger sales and operating efficiencies, the profitability of processing privately supplied cane remains sensitive to procurement prices and the proportion of revenue retained by the miller.

The newly introduced payment deadline adds a further financial consideration. Under the regulations, growers must be paid by the eighth day of the month after delivering cane unless an alternative arrangement is agreed in writing. Growers benefit from greater certainty over receipts, which can support input purchases, loan repayments and the maintenance of irrigation operations.

Millers must manage the corresponding cash outflow against the timing of sugar production, marketing and customer payments. Where cane is purchased before the resulting sugar generates sales receipts, processors may require additional working capital. Financing costs can increase when payment obligations mature ahead of customer collections, particularly during periods of concentrated harvesting and crushing activity.

The wider sugar industry's financial performance provides context for the regulatory intervention. Zimbabwe's sugar exports increased substantially during the year ended March 2026, reaching approximately 92,518 tonnes, while Hippo Valley reported improved profitability. However, the expansion of export volumes exposes producers to international prices that may be less attractive than domestic market realisations.

Regional competitiveness is especially important because Zimbabwean millers compete with producers operating under different cane procurement arrangements, tax systems and energy costs. Higher domestic input costs restrict the ability to compete in price-sensitive export markets unless they are offset through superior sugar recovery, improved factory utilisation, lower logistics expenses or more favourable market access.

Government's pricing intervention therefore introduces a need for stronger disclosure of the financial assumptions underlying the US$72.40 determination. The relevant measures include actual cultivation costs by grower category, cane yields, irrigation expenditure, recoverable sugar content and processing costs. The distinction between Cane Purchase Agreements and Cane Milling Agreements should also remain explicit in the industry's future regulatory reviews.

Hippo Valley's comparative figures indicate that Zimbabwe's growers receive a relatively high share of sugar revenue, while its own cost estimates suggest a positive gross margin under the newly regulated cane purchase price. Growers' actual financial performance, however, remains dependent on costs that vary significantly between operations. Independent verification of these figures would establish a more reliable basis for setting future prices and resolving disputes.

The US$72.40 statutory price provides clarity on cane purchasing and payment obligations following months of disagreement between growers and millers. Its economic effect will emerge through the cost of privately supplied cane, the profitability of growers, milling margins and the ability of Zimbabwean sugar to compete in regional markets. A sustainable framework will require evidence-based pricing reviews, transparent revenue-sharing arrangements and coordinated action on the taxation, financing and infrastructure costs affecting both sides of the industry.

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