Zambia Sugar launches $82m project to up Nakambala capacity

18th February 2015

By: Tracy Hancock

Creamer Media Contributing Editor

  

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Zambia Sugar, a majority-held subsidiary of JSE-listed Illovo Sugar, is undertaking an $82-million expansion to increase the production capacity at its Nakambala sugar operations, in the town of Mazabuka, consolidating the company’s position as Africa's single-biggest cane sugar producer.

Illovo advised shareholders on Wednesday that the major investment would give further impetus to the development of Zambian smallholder cane farmers and provide employment opportunities for local people during the construction phase, which was scheduled for completion in 2016. 

The various civil and specialist equipment contracts would be awarded and full construction of the refinery and ancillary operations, which would be integrated into the existing factory environments, were scheduled to start in the first half of this year. It was envisaged that after the start-up of the Nakambala factory in April 2016, the refinery would come on stream in May that year. 

The project included the construction of a modern, high-specification refinery that was expected to more than double the current yearly refined sugar production capacity to about 100 000 t and increase yearly sugar production capacity from 420 000 t to 450 000 t through a range of smaller factory improvements.

Illovo pointed out that the key driver for the investment in Zambia was the strong historical and forecast domestic refined sugar sales growth, which had been primarily driven by demand from domestic and regional industrial manufacturers. “The project also brings with it a unique opportunity to align Zambia Sugar’s manufacturing assets behind a new post-European Union export sales mix and higher food safety standards,” the group added.

This strategy was expected to ensure that both direct consumers and industrial customers of the range of Whitespoon branded products continued to receive the sugar and syrup products they liked best at the exacting quality standards they demanded. 

Newly appointed Zambia Sugar MD Rebecca Katowa indicated that the company’s strategic plan focused on diversification by adding value to its core sugar products to achieve sustainable growth.

“This project, together with the previous significant expansion of [our] agricultural and factory operations, serves as growing evidence of this strategy and of our support of government initiatives to promote rural development.

“We are pleased that this investment touches on the continuing development of our successful smallholder sector whose increasing cane supplies to the factory are fully supported in the project plan and [offer] further job opportunities for Zambian people," she added.

Illovo explained that the increased cane supply required for the improved Nakambala factory would primarily come from area expansions, of which smallholder development at Manyonyo, involving about 145 individual growers, was a major part.

“This development will benefit the local community in terms of both revenues derived from the supply of cane to the factory and, as part of a broader multiplier effect, employment opportunities for seasonal agricultural workers, [as well as] other job creation opportunities,” the group noted.

The employment of more than 400 people  during the construction phase of the project was estimated. Aligned with Zambia Sugar’s existing employment policy, local people with the necessary skills would be given priority in the recruitment process. 

Katowa emphasised that Zambia Sugar wished to continue contributing to national government imperatives, which included the enhancement of economic activity in the country, increased foreign direct investment, rural development and increased socioeconomic contributions from the private sector which benefit all Zambians. 

The project cost would be funded by debt finance largely sourced from within Zambia and from Zambia Sugar’s own available cash resources. As such, the company said the investment underlined its commitment to the economic growth and prosperity of Zambia, and aligned it strongly with the government's clearly stated desire for greater levels of direct investment.

The project would use standard Zambian tax allowances as legislated to encourage capital investment in the country. 

During the most recent reporting period ending March, Zambia Sugar’s outgrower partners supplied 1.29-million tons of cane for processing at the factory, generating revenue of ZMW332-million. Of this revenue, about ZMW66-million was paid directly to smallholder farmer schemes, directly and positively impacting economic growth, enterprise development and job creation through multiple support services such as cane haulage and land preparation.

The continuing emergence of new smallholder schemes, with which Zambia Sugar was directly involved, reflected the company’s commitment to support the development of sustainable, commercially-directed farming business models and governance systems in its growing community. 

In the six months to September 30, the Lusaka Stock Exchange-listed company reported a revenue increase in the half year of 5% to ZMW966-million and profit from operations increasing to ZMW149-million, or 3%, on the back of solid performance in both its agricultural and manufacturing operations.

The Nakambala project also underlined the broader Illovo group strategy of focusing on growth within its domestic and regional markets and downstream opportunities to diversify its product mix. 

Illovo currently employed more than 30 000 people across six Southern African countries and was Africa’s biggest sugar producer.

Edited by Creamer Media Reporter

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