Hippo Valley Estates says Government’s suspension of import duty through Statutory Instrument 98 on 16 basic commodities including sugar resulted in declining sugar domestic market sales.
The Government in May last year suspended import duty on specified basic commodities to cushion citizens against the obtaining price hikes on local goods.
Apart from sugar, other products with suspended import duty are rice, flour, cooking oil, margarine, salt, and maize meal. The other goods include milk powder, infant milk formula, tea, petroleum jelly, toothpaste, bath soap, laundry bars, and washing powder.
At the time, the Government said it was allowing citizens with access to foreign currency to import cheaper basic commodities for their own use in view of substantial increases in prices of locally manufactured products.
However, Hippo Valley Estates said industry sugar sales into the domestic market for the period to December 31, 2022 totalled 278 106 tonnes and were 3 percent below the comparable period in the prior year.
“The decline arose from increased competition from sugar imports after the Government suspended import duty through SI98 on 16 basic commodities including sugar,” said Canaan Dube, the company’s chairman in a trading statement for the third quarter period.
He said Hippo Valley’s share of the total industry sugar sales volume of 397 055 for the nine months’ period was 52,26 percent compared to 53,59 percent in 2021.
Dube noted revenue realisations on the local market in both local and foreign currency and remained firm as most customers continued to support local brands against the imports that were available in the local market from May to December 2022.
During the period under review, export sales volumes increased by 27 percent to 40,246 tonnes compared to 31,607 tonnes in 2021. He said there was an improved allocation of the United States Tari‑ Rates Quota which contributed to higher average export prices.
“This export quota remains secure and has been consistently fulfilled. While the Kenyan market has been a significant regional export market for the past three years, the improvement in their local sugar producers’ output has resulted in a reduction in imports from COMESA in line with the trade protocols on sugar.
“Efforts are underway to expand the regional export market base so as to reduce the market concentration risk,” he said.
Meanwhile, Dube said the impact of current cane expansion and yield improvement initiatives will crystallise in future seasons due to the long cropping cycle for sugarcane.
As a result, current marketing focus remains on optimising returns, specifically through prioritising local market requirements and allocating residual stocks to regional and premium international markets to generate additional foreign currency.
“It is envisaged therefore, that there will be continued local demand in foreign currency which will assist with procurement of imports of certain specialised goods and services.
“Any potential impact of liquidity and currency distortions on the company’s working capital will be supported by both local and foreign currency funding facilities with reputable financial institutions,” he said.
Dube said the company is working closely with the Government to operationalise the memorandum of understanding with respect of how to progress the Kilimanjaro Project as part of socio-economic empowerment.
He said the company continues to provide input and extension support to over 1 000 farmers operating on approximately 20 000 ha.
“A rigorous training programme is currently running where farmer supervisors are taken through sugarcane crop production courses covering irrigation water application and scheduling, crop protection and crop nutrition,” Dube said.
He noted irrigation water cover for approximately two seasons at normal water duty is secured within the industry’s water supply dams.
Latest national and regional weather forecasts indicate normal and above normal rainfall which will further strengthen the industry’s security of irrigation water.
Dube said sugar production for the upcoming 2023/24 season is forecast to be marginally above levels achieved this season.