Zimbabwe’s biggest cane sugar producer, Hippo Valley Estates, is laying the foundation for aggressive growth in volumes in the long term, researchers at advisory firm, Morgan&Co, said in a new analysis of the firm’s operations.

The Zimbabwe Stock Exchange-listed giant was recently given a greenlight to develop 3 300 hectares of its Project Kilimanjaro in the Lowveld.

The project is projected to employ about 1 500 people, according to several estimates.

About 165 cane farmers will be allocated 20-hectare plots each when the project is developed fully.

Last week, the firm valued the project at about US$25 million.

In an analysis that projects stock market trends in 2023, Morgan&Co said while it was concerned about a slowdown in consumption in Zimbabwe, Hippo was on track to increase volumes as the project unfolds.

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However, the report projected that inflation-led price adjustments in the coming year will be affected by depressed demand in Zimbabwe.

This slowdown in consumer uptake had been seen globally in the past year, the report added.

“Global sugar prices have slowed, losing 2% compared to last year,” Morgan&Co said.

“Although local sales have absorbed volumes destined for export markets, constrained disposable incomes in Zimbabwe are likely to limit any inflation-driven price adjustments in 2023. The Kilimanjaro project has taken off and we expect this to support volumes growth in the long term,” the researchers noted.

“We note that the currency rate disparity will continue to present downward pressures on profitability, but the steep depreciation in the official rate from US$1:$142 to US$1:$521 in five months is expected to defend bottom line performance through significant fair value (FV) gains in biological assets in FY23.”

Project Kilimanjaro is a game-changing massive undertaking that is seen as a catalyst to Zimbabwe’s sugar industry’s long cherished ambition to fully utilise its 600 000 tonnes installed milling capacity by 2025 and position the country as one of the most competitive sugar producers in southern Africa.

It is being executed in partnership with Triangle Estates, which also operates some of Zimbabwe’s largest sugar cane estates.

Both firms are owned by South African headquartered Tongaat Hulett.

In its report, Morgan&Co said the year 2023 would be characterised by productivity constraints across sectors, mainly caused by capital challenges, policy shifts and electricity shortages.

“As a result, we estimate gross domestic product growth in 2023 to be at 2,5%,” Morgan & Co noted.

The firm expressed concern Zimbabwe that is experiencing severe levels of load-shedding of up to 12 hours per day due to technical challenges at thermal power generation plants, falling dam levels and imports constraints.

“This level of power outages was last witnessed in 2019 during the height of acute foreign currency shortages amid repeated breakdowns of thermal plants, a back-to-back drought causing dam levels to plummet, austerity measures and abrupt re-introduction of the Zimbabwe dollar,” it said.

“According to the Zimbabwe Country Economic Memorandum, published by the World Bank in 2022, labour productivity growth has remained depressed over the past two decades,” said the firm.

“The World Bank report cites that there is a significant misallocation of resources between sectors and limited structural transformation at the sectoral level. For example, considerable labour and capital are allocated to the agriculture sector, despite productivity being the lowest,” Morgan&Co added.