• A net loss of ZWL2 billion was recorded
  • The Group attributed this to production costs and free duty on sugar
  • Sugar market outlook

Harare- Star Africa Corporation, a sugar producer listed on the Zimbabwe Stock Exchange (ZSE), has reported a loss after tax of ZWL2 billion for the full year ended 31 March 31 2023. This represents a significant decline from the net profit of ZWL2.3 billion recorded in the previous year. The company faced several challenges including production difficulties, high operating costs, and the negative impact of cheap imports on its performance. These factors contributed to the company's financial loss at large.

The Group experienced a 6% decline in production at Gold Star Sugars, with production decreasing from 82 399 tonnes in the prior year to 77 270 tonnes. As a result, sales volumes also decreased slightly from 82 500 to 82 321. The costs of sales, which include expenses directly associated with production, consumed the total turnover of ZWL50 billion, leaving the company with a gross profit of ZWL7.9 billion.


Rungano Mbire, the Group's chairperson, has attributed the decline in profit to the rise in raw sugar prices and operating costs in real terms. The company faced challenges due to increasing global inflationary pressures, which led to higher costs for imported chemicals, packaging, and refinery spares.

The costs were additionally affected by the significant depreciation of the Zimbabwe dollar during the reviewed period. This depreciation was a result of the implementation of fragile monetary policy measures, which led to a spike in reserve money and treasury bills issuance to cover government expenditure.

However, outside the Group’s reach, Mbire attributed the decline in profit to the impact of government policies on sugar imports during the period. On May 17 2022, the Zimbabwean government, through the Minister of Finance and Economic Development, implemented Statutory Instrument 98 of 2022. This instrument immediately and completely suspended customs duties on the importation of basic commodities, including sugar. As a result, cheap sugar imports flooded the market, intensifying competition between local farmers and imported sugar. This increased competition adversely affected the Group's profitability, as it had to contend with the challenges of competing against cheaper imported sugar.

The decision to suspend duty on sugar imports aimed to increase the availability of affordable sugar within the country. However, this policy change had unintended consequences. While it succeeded in lowering sugar prices, it also resulted in a flood of foreign sugar brands into the local market, thereby impacting the market share of domestic producers. Approximately 17 brands of cheap sugar were estimated to have been imported during this period.

The imported sugar often originated from countries with lower production costs and government subsidies, giving them a competitive advantage in terms of pricing compared to locally produced sugar in Zimbabwe, where production costs are relatively higher. Notably, the majority of the imported sugar came from Zimbabwe's largest trading partner, South Africa, along with other countries such as Tanzania, Kenya, and Swaziland. As a result, the market share of domestic sugar producers was compromised, impacting their profitability.

Mbire expressed his hope for the government to reinstate duties on imported sugar, as this would have a positive impact on the local sugar industry. The reinstatement of duties would help level the playing field for local producers by reducing the competitive advantage enjoyed by cheap imported sugar. By imposing duties, the government could create a more favourable market environment that supports and promotes the growth of the domestic sugar industry. This would provide local producers with the opportunity to regain market share and improve their profitability.

Despite the challenges faced by Star Africa Corporation, there was a positive development in the sales volumes of CCF's products. Sales volumes increased by 9% compared to the previous year, rising from 1879 tonnes to 2048 tonnes. This growth was attributed to competitive pricing strategies implemented by the company.

There was an improvement in the production of sugar specialties, with an increase from 1920 tonnes in the previous year to 2140 tonnes during the reporting period. This increase in production was supported by the procurement and commissioning of automatic syrup filling and icing packing machines. These machines played a crucial role in boosting production efficiency at the unit, contributing to the overall growth in sales volumes. The investment in new machinery and the focus on sugar specialties helped the company capitalise on market opportunities and enhance its competitiveness in the industry.

During the twelve-month period under review, CCF introduced new products into the market. These included drinking chocolate, powdered mahewu (a traditional African drink), baking powder, cocoa powder, and baking raisins. These product launches aimed to expand the company's product portfolio and cater to the evolving preferences and demands of consumers.

In the properties business, there was a significant improvement in revenue performance. The business recorded ZWL337.5 million in rental income during the period, compared to ZWL162.2 million in the previous year. This reflects an increase in rental revenue, indicating positive growth and performance in the properties sector of the company.

Regarding Tongaat Hulett Botswana, which is an associate of Star Africa Corporation, it reported a profit for the reviewed period of ZWL958.1 million. After converting the earnings into Zimbabwean Dollars at the Reserve Bank of Zimbabwe Auction exchange rate as of March 31, 2023, the company's share of the profit amounted to ZWL319.4 million. This indicates a positive financial outcome for the associate company, which has a beneficial impact on Star Africa Corporation.

The Board of Star Africa Corporation has decided not to declare a dividend for the year ended March 31, 2023. This decision is driven by the company's focus on maintaining adequate working capital in the face of a volatile operating environment.


Looking ahead, the operating environment in Zimbabwe is expected to continue presenting challenges, largely due to ongoing inflationary pressures. However, there has been a recovery in the value of the Zimbabwe Dollar following a significant depreciation in June 2023. This recovery may contribute to some level of stability in the market. To achieve greater stability, it is important for the government to maintain the implementation of tight monetary and fiscal policies that were put in place since May 2023. These policies, if sustained, have the potential to address some of the economic challenges and bring about increased stability.

However, it is worth noting that achieving stability in the market may require making difficult choices and sacrifices in other sectors, such as construction, as well as addressing corruption within the country. Additionally, Zimbabwe may explore opportunities for investment from eastern countries to offset the impact of Western sanctions.

On the other hand, the global sugar market is facing challenges due to production issues in primary sugar-producing countries like India and Thailand. Both countries are grappling with various challenges that are affecting their sugar output. In India, the lack of monsoon rain and reduced crop yields have raised concerns about the country's sugar production. As a result, India may likely curb sugar exports to meet domestic demand. If this happens, it could contribute to a tighter global sugar supply and potentially lead to higher prices. The monsoon rain deficit of -10% below normal in India during the months of June to August, along with the historically low rainfall in August, are causing apprehensions about a potential decline in crop output.

Insufficient rainfall can negatively affect sugarcane cultivation, as it requires adequate water supply for optimal growth. The reduced crop output in India, coupled with the possibility of sugar export restrictions, can lead to a tightening of the global sugar supply. When supply decreases or is expected to decrease, it tends to put upward pressure on sugar prices.

These weather-related concerns in India highlight the vulnerability of the global sugar market to natural factors. As India is one of the largest sugar producers globally, any significant changes in its production levels can have a substantial impact on global sugar prices and supply-demand dynamics.

Similarly, Thailand is experiencing challenges in its sugar industry. Some farmers in Thailand have been shifting from sugarcane cultivation to more profitable crops like cassava. This shift is driven by economic considerations and the pursuit of higher returns. As a result, the availability of sugarcane for sugar production may be impacted, potentially leading to a reduction in sugar output.

Considering these factors, the sugar market outlook appears positive, with the potential for higher prices due to the anticipated growth in demand and potential supply constraints.

Equity Axis News